PARIS – Scrambling to cut costs in the face of a deepening economic recession and falling demand, Air France-KLM and Singapore Airlines are considering delaying taking delivery of previously ordered aircraft.
Singapore Airlines said Monday it will cut capacity by 11% in the fiscal year ending March 31, 2010, while Air France-KLM said Friday it is aiming for a 2% capacity cut beginning this summer.
The moves show the global economic crisis is battering even the biggest of airlines. Several European carriers are yet to report on the October-December period. But they are suffering the same combination of recession, high fuel costs and diminished demand.
British Airways last week reported a swing to a pretax loss in the fiscal first nine months and said it continues “to review every aspect of the business to control costs while at the same time improving the customer experience and operation.”
Franco-Dutch Air France-KLM’s U.S. partner Delta Airlines has posted a big loss for the final three months of last year and plans to remove 40-50 mainline aircraft from its fleet to eliminate fixed costs associated with its 6- 8% system capacity cuts.
In reporting a swing to a EUR505 million fiscal third-quarter loss, Air France-KLM Friday disclosed measures including deferring, though not canceling, plane deliveries, the capacity cut, job reductions through attrition and voluntary departures, reduced capital spending and deepening the company-wide cost-cutting plan. It also plans to cut fuel costs and unwind costly fuel hedges.
On Monday, Air France-KLM, which is Europe’s largest airline by market value, specified it will seek to delay taking delivery of some aircraft by two to three years. The delays would affect about a half a dozen aircraft, including Boeing 777-300 planes, Boeing 777 cargo planes and Airbus planes, a spokesman said. Delivery of the Airbus A380 is still planned for the end of the year.
French business daily Les Echos reported the airline could delay delivery of three Boeing 777-300 planes until 2013, while one of three Boeing 777 cargos could be stalled for 18 months.
Singapore Airlines said Monday it will decommission 17 aircraft over the year, rather than the four planes initially planned. The company last week posted a 42% decline in net profit for its fiscal third quarter. A spokesman in Singapore Monday said the company can’t rule out delaying deliveries on orders.
“The drop in air transportation has been sharp and swift,” Singapore Airlines’ Chief Executive Chew Choon Seng said in a statement. “Given the falls of over 20% that we have seen recently in air cargo shipments, and the tradition of demand for air travel following closely behind trends on the cargo side of the business, we have to face the reality that 2009 is going to be a very difficult year,” he added.
Air France-KLM, too, has been suffering a sharp decline in cargo haulage, though its passenger business has been holding up relatively better than the cargo sector.