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Air France not being investor-friendly June 1998 Download PDF

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Air France and BA both produced their financial results for 1997/98 on the same day — May 27th. That should have afforded the possibility of some interesting comparisons. Unfortunately, the only relevant comparable numbers are those shown in this little box. Whereas BA produced its usual exhaustive accounts, Air France released some skimpy numbers and a few odd graphs but no detailed analysis.

This is a shame as Air France has a reasonable story to tell. It produced a profit for the first time in the 1990s and its profit margins on revenues were respectable. The main driver behind the turnaround from 1996/97 (when a net loss of $25m was reported) was labour cost restraint — this cost item was actually slightly down on 1996/97.

Capacity growth was restrained as well, pushing up the average passenger load factor to 75.2%. The lack of "investor–friendliness" in Air France’s approach again raises questions about its preparedness for its part–privatisation, now scheduled for September. And there are more direct problems with its biggest single investor group — the pilots. Ex–Air Inter pilots demanding parity with their Air France colleagues are threatening strike action in the summer when the World Cup is being held in France.

Should this happen, Air France’s image will again be dented, it will have to re–convince investors that its unions are committed to a commercial approach and it may be forced to accept a delay in its privatisation to the end of the year.

  Air France British Airways
Revenue 10,222 14,144
Operating profit 415 825
Net profit 315 753
Operating margin 4.1% 5.8%
Net margin 3.1% 5.3%

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