Kevin O'Toole/LONDON
AIR FRANCE, now in the final stretch of its restructuring plan, has posted its first full-year operating profit since 1989, but the news is tempered by uncertainty over whether the European Commission (EC) will approve the final tranche of state aid.
The latest financial results, now based on a March year-end, suggest that the airline is on course with its restructuring. An operating profit of Fr413 million ($82 million) compares with a loss of more than Fr900 million in the previous year.
The airline expects to achieve overall break-even by the end of the current 1996/7 financial year. There is still a chance, however, that plans could be upset if the EC decides to block the Fr5 billion final tranche of Fr20 billion of state aid.
"The Commission is currently examining whether all the conditions for this final tranche have actually been met," says Transport Commissioner Neil Kinnock.
The temperature has already been raised by complaints from KLM, Lufthansa and Scandinavian Airlines System that the French carrier has been price-leading on key routes. A decision is due before the end of July.
A legal challenge to the original EC approval, led by the UK Government and British Airways is expected to receive a hearing by September in the European courts.
Much of the operating improvement appears to have come from cost-cutting instituted by chairman Christian Blanc. Labour costs were down by 4.7%, while average staff numbers fell by more than 1,800, to fewer than 36,500.
Sales edged down over the year, however, reflected in a 6.5% drop in passenger yields, which cancelled out the gains from a 4% increase in traffic. Air France says that the strength of the French franc wiped almost Fr1 billion from turnover, while strikes in December cost another Fr300 million.
The carrier's bottom line was also showing improvement after the first two tranches of the Fr20 billion in state aid. That has been used to cut Air France's debt.
The airline says that its 1995/6 net losses were "slightly better than target" at Fr878 million, although another Fr2 billion was put aside to cover cabin-crew redundancies and the cost-cutting plan now being considered by ground staff.
Source: Flight International
