May 15, 2021

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AIR FRANCE-KLM CEDES CARGO, PASSENGER OPERATIONS TO TRAIN

2 min read

The Franco-Dutch international airline, Air France-KLM, has begun touting with a very rare idea in shedding its financial burden with the view to run profitable especially on its short-haul, domestic operations where it recorded a loss in excess of €200m last year, by ceding its domestic operations to rail transportation.

Although most prominent among the official statement adduced by the airline was about its persistent efforts to reduce the carbon monoxide co2 emission from its aeroplanes by using environmentally friendly and fuel-efficient aircraft for its operations.

The Franco-Dutch aviation group which recently bagged €7 billion palliatives from Paris to cushion the losses caused by the COVID-19, said as a means to mitigate the loss of last year, 2019, and to spritely rise to the debilitating effect of the pandemic, the management is strongly considering rail for both the passenger and cargo business on the short-haul domestic operation.

Also providing a rationale for the extra ordinary caution in the investments to be made with the bailout, the French Finance Minister, Bruno le Maire, when the palliative was approved said, “this aid package is accompanied by the necessary sustainability requirements”. Which means government of France does not envisage insolvency by any garb what so ever.

No doubt the airline is on a cliff edge, as the Dutch pledged support, ranging from between €2billion to €4 billion, is still under negotiation, yet to materialize. Hence Air France is very much determined to avert losses in its domestic operations and the decision to execute its domestic contracts by rail transport.

Management of Air France-Dutch Airline reasoned that since it will be about 2022 before the airline could experience the pre-COVID-19 level of operations, it will rather invest very cautiously.

This informs why the erstwhile planned €8billion investment was cut to €2.4 billion. It also took cognizance of the fact that the pledged bailout by the Dutch government was at best still a promise.
The airline’s management reasoned that by the present operating environment, vis a vis pledges yet to be redeemed (by the Dutch government), planned investments have been reduced by a third and the operating cost will also be reduced in a manner that commensurates with the available capital to run the airline on a profit path.

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