Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) has blamed supply chain problems for weaker profit in the second quarter of 2023.
Despite a 16% increase in revenue, the MRO provider’s operating profit fell 10% year-on-year to €46 million ($50.7 million), while its margin declined 1.8% to 4.4%.
AFI KLM E&M said longer turnaround times had limited its opportunities to expand third-party services.
“Due to the tight labor market and supply chain disruptions, the average time for maintenance increased, resulting in less growth opportunities for third-party revenues impacting the profitability,” said the company in its second quarter results.
This is a marked change to 2022, when the MRO provider’s parent was keen to stress the “significant number” of third-party contracts signed during the year. Third-party business agreed to during the year included new contracts with Air Canada and Aeromexico, and an APU and component support contract with India’s Akasa Air.
Last year, Air France KLM’s third-party sales were growing faster than its internal work for Air France-KLM Group airlines. In the final quarter of 2022, for example, third-party sales climbed 41%, but that growth had slowed to 11% by the second quarter of this year.
While external business continued to grow quicker for the first six months of 2023, in the most recent quarter it was outpaced by internal work as Air France-KLM group airlines added capacity, reaching 92% of pre-pandemic capacity.
By June 30, third-party work accounted for 38% of AFI KLM E&M revenues, which is almost the same as for the 2022 full year.
If supply chain bottlenecks persist, though, the MRO provider may well lean more on internal work through the rest of the year.
