Originally Posted by
shiznit
....Ouch, but we finally know what the metric the percentage will be comparing.....
Standby for the AE!
More from bloomberg on this with AF:
Delta, Air France Cut Atlantic Capacity - Bloomberg
Delta Air Lines Inc. (DAL) and its SkyTeam alliance partner Air France-KLM Group said they’ll slash winter capacity in their trans-Atlantic joint venture by as much as 9 percent to cope with rising fuel costs and fluctuating demand.
The cuts, which also involve Italy’s Alitalia SpA, will entail lower frequencies to some destinations and a reappraisal of the joint Atlantic fleet, with some aircraft redeployed to warm-weather destinations where winter demand is stronger.
Air France’s negotiations with Delta over the reductions were “vigorous” and tested the governance of the joint venture, Pierre-Henri Gourgeon, the Paris-based company’s chief executive officer, said today at a press briefing. The three carriers jointly operate 260 daily flights across the Atlantic with a fleet of 144 planes, generating $11 billion in annual revenue.
Delta failed to lift ticket prices on Atlantic routes in the first quarter after boosting capacity there 16 percent as traffic rose 6 percent, it said last month. The disparity reduced seat occupancy by 6.4 percentage points and helped push the world’s second-biggest airline to a $318 million net loss.
Peter Hyde, an analyst at Liberum Capital in London, said today in an investor note that Delta and Air France had revealed future seating plans “early” and that he’s concerned about the European carrier’s “strategic positioning” in the light of last winter’s capacity deployment and issues over yields or pricing.
Price Reversal
Airlines returned to profit in 2011 by slashing routes, cutting frequencies and raising fares on remaining flights. A glut of seats could prompt a reversal in prices and also make it tougher for carriers to pass on the spiraling cost of jet fuel, said Chris Tarry, an independent airline analyst in London.
“It’s better to have fewer seats and people being prepared to pay a bit more to fly than having excess capacity and not being able to recover the costs,” said Tarry, who has followed the aviation industry for almost 30 years.
Air France’s fuel costs increased by 1 billion euros ($1.4 billion) in the year to March 31 and by 186 million euros, or 15 percent, in the fourth quarter, when post-hedging fuel expenses rose 7 percent. The bill may jump 26 percent this year.
As part of the winter shakeup, Air France will switch planes to seasonally busy cities such as Cape Town and Cancun, Mexico, it said, with Gourgeon adding that “it makes far more sense to use the planes in zones where the demand is stronger.”
‘Confused’ Stance
Air France said Feb. 21 it would add flights to locations including Orlando as it boosted summer seating 5.7 percent, less than two weeks after Gourgeon warned “significant overcapacity” on North Atlantic routes was starting to crimp earnings.
Willy Walsh, CEO of International Consolidated Airlines Group SA, formed from a merger of British Airways and Spain’s Iberia in January, said at the time that the Air France chief’s comments were unhelpful and “confused.”
IAG spokeswoman Laura Goodes said today that the London- based company had no comment on the Delta-Air France announcement, while confirming that it plans to lift capacity at an underlying rate of about 5 percent for the rest of 2011.
Air France-KLM (AF) said separately today that its fourth- quarter operating loss narrowed as cost cuts and increased demand for travel outweighed higher fuel expenses and disruption caused by the Japanese earthquake and unrest in Arab states.
Europe’s largest airline pared the loss for the three months through March to 403 million euros from 497 million euros a year earlier, pushing it to the first annual profit in three years. Full-year traffic grew 1.1 percent, led by a 4 percent jump on Asian routes.
Air France Gains
The annual result was spurred by a “strong recovery” in most markets, Air France said, with seat occupancy increasing 1 percentage point to 81.6 percent and cargo traffic up 2.5 percent. The company shaved 595 million euros from costs and said it’s seeking a further 470 million euros this year.
Air France-KLM rose as much as 2.3 percent to 12.16 euros and was trading at 12.13 euros as of 12:32 p.m. in Paris, where the company is based, paring the stock’s decline this year to 11 percent and valuing the company at 3.64 billion euros.
Gourgeon said the company won’t pay a full-year dividend as it focuses on “longer term objectives” including a “significant reduction” in gearing. Net debt was cut by 300 million euros to 5.9 billion euros in the year, with the debt- to-equity ratio reduced to 85 percent from 115 percent.
Excluding one-time items such as gains from the sale of shares in flight-reservations system Amadeus, the company said it would have recorded a 234 million-euro full-year net loss, narrowing from a deficit of 1.23 billion euros a year earlier.