The financial pain from the pilot strike that crippled Air France-KLM Group last month could eventually total €500 million ($632 million), and the beleaguered airline is still no closer to resolving the cost issues that set off the flight disruptions.
The worst-case financial fallout envisioned in an Air France-KLM investor update on Wednesday hasn’t come to pass, but the two-week strike has already cost the airline at least €8364;320 million. And the damage already incurred could reach as much as €8364;350 million if passengers do not rebook flights deferred during the strike. The airline said passenger traffic dropped almost 16 percent in September.
Yet disgruntled pilots are not even the extent of the financial pain for Europe’s biggest airline. People appear to be booking fewer trips for the fourth quarter, and the company on Wednesday cited “the unfavorable demand trend seen since the early summer and subsequently confirmed.”
Air France pilots quit flying on Sept. 15 to protest the airline’s plan to have Transavia, a lower-cost KLM unit, assume most short-haul flying in Europe as a way to curb labor costs and improve profit. That effort was similar to a strategy at Lufthansa (LHA:GR), which has shifted much of its shorter European flying over the past two years to its lower-cost Germanwings airline. Lufthansa customers have also experienced pilot strikes this summer due to the airline’s efforts to lower employment costs.
To end the strike, Air France backed off its plans for Transavia to take over flights across Europe and said it would focus on using the carrier for flights in France. Air France said it would further reduce short and medium flights this winter by more than 11 percent. Three months ago, before the strike, Air France-KLM cut its 2014 profit forecast to a range of €2.2 billion to €2.3 billion.