Air France-KLM Woes Hit MRO Unit

Last year the MRO provider’s total revenues fell 38% and it recorded an operating loss of €543 million.
Credit: AFI KLM E&M

Air France Industries KLM Engineering & Maintenance has reported results broadly in line with the pain felt by much of the MRO sector last year.

In 2020, the MRO provider’s total revenues fell 38% and it recorded an operating loss of €543 million ($657.8 million), versus an operating profit of €260 million in 2019. Net loss for the group as a whole was an eye-watering €7.1 billion.

Of course, the full year benefited from an initial two to three months of normal business conditions. With the crisis in full swing, in the final three months of 2020, AFI KLM E&M reported 48% lower sales.

This included 45% lower third-party revenues, which form just under half of the MRO provider’s total sales, but most severe was the reduction of in-house work for its parent airlines.
 
Across its passenger network in 2020, Air France-KLM operated 54% lower capacity than in the previous year and transported 67% fewer passengers. 

Meanwhile, its MRO subsidiary reported €320 million of exceptional items resulting from the coronavirus crisis, including €120 of doubtful receivables and €90 million from a contracts review.

Last year, Air France-KLM chief financial officer Frederic Gagey warned investors that AFI KLM E&M was going to suffer from the knock-on effects of its customer airlines’ financial woes, saying: “With the crisis we have bad debt. We have clients which are going into bankruptcy. We have clients which are changing their contracts.”

At the end of 2020, AFI KLM E&M’s maintenance order book stood at $9.1 billion, a decrease of $2.4 billion dollars compared from 31 December 2019.

The MRO provider said it “is carefully managing agreements with clients on payment terms”, also noting that “Air France-KLM maintenance activity is well positioned on new generation aircraft maintenance and foresees solid opportunities for the future”.