After months of uncertainty on the fate of the A380, Air France-KLM finally announced it would sell the five superjumbos it owns by 2022. The group also confirmed the acquisition of 60 A220-300 aircraft as part of its fleet modernization strategy and reported strong results for the second quarter of 2019.
A “solid” second quarter
Air France-KLM revenue rose by 6.4% to more than €7 billion in the second quarter of 2019, and the operating income rose by 15.6% to €400 million when compared to the same period in 2018. However, the number has to be moderated as a year ago, industrial action at Air France weighed heavily on the group’s financial results. When compared to the second quarter of 2017, the operating income is, in fact, lower by 19%, or €95 million.
While social tensions seem to have been appeased by the management within Air France personnel after the conclusion of long wage negotiations, distrust is still high at KLM. In February 2019, the KLM group of managers wrote a letter in which they pointed to what is generally felt as “unilateral decisions” taken by Ben Smith without “a clear strategy for Air France-KLM and the roles of the airlines within the group”.
The first step towards fleet modernization
Air France-KLM has confirmed its firm order of 60 Airbus A220-300 aircraft, with an additional 30 purchase options and 30 acquisition rights. The order is valued at €4.9 billion ($5.5) at list prices. The first aircraft should be delivered by September 2021. With a capacity of 149 seats and an operating range of 2,300 nautical miles, the A220-300 is due to replace the A318 and A319. “It is […] perfectly adapted to our domestic and European network and will enable Air France to operate more efficiently on its short and medium-haul routes,” said Benjamin Smith in a press release of the manufacturer.
The new order materializes the ambition, expressed by Benjamin Smith, to see Air France and KLM unify through common aircraft orders. This strategy had faced criticism in the past from the Dutch airline.
Scrapping plans announced in late 2018, Air France-KLM decided to let go of the five superjumbos it acquired in 2000 for €100 million per unit. The cost of modernizing cabins to continue operating the aircraft has been judged too high. Thus the five aircraft will be sold by 2022. “The current competitive environment limits the markets in which the A380 can profitably operate,” states the group, adding that “keeping this aircraft in the fleet would involve significant costs, while the aircraft programme was suspended by Airbus earlier in 2019”.
On top of the cost for refurbishing, the recurring technical problems affecting the aircraft in the past years may have sealed its fate. In 2017, about 20 Air France flights were canceled due to technical problems related to the A380. The most serious one saw the failure of one of the engines on a Paris-Los Angeles flight, resulting in an emergency landing in Canada. The engine parts were recently recovered under the ice of Greenland after two years of research.
The group will now have to study a possible replacement for the A380 among the current aircraft generation. Potential widebody contenders could be either the A350XWB or the Boeing 777X. However, Air France-KLM could instead rely on either Boeing 787 Dreamliner or A320neo which are cheaper and allow for more network flexibility.