Ben Smith Air France-KLM Promises To Be A Bumpy Ride

Ben Smith This is another interesting ingredient!

Air France-KLM (OTCPK:AFLYY) made headlines over the past year due to strikes, but there are underlying issues with this airline which make its stock one for investors to steer clear from in my opinion.

The strikes over pay disputes which plagued Air France-KLM were far from being minor annoyances. They caused months of disruption, resulted in millions of euros lost, and forced the resignation of the group’s CEO Jean-Marc Janaillac. His replacement, former Air Canada (OTCQX:ACDVF) executive Ben Smith, managed to cut a deal with union bosses which ended the strikes in October. Rising fuel prices also have eaten into the group’s bottom line in the present financial year, though only the Q1 2019 results reflect that impact as Smith implemented cost-cutting measures to offset the fuel price rises.

2019 Quarter Revenue (€) Revenue ($) Net Income (€) Net Income ($)
Q1 5.99 billion 6.72 billion -320 million -359.26 million
Q2 7.05 billion 7.92 billion 80 million 89.82 million
Q3 7.7 billion 8.64 billion 366 million 410.91 million
Total 20.74 billion 23.28 billion 126 million 141.47 million

Figures collated from quarterly reports on Air France-KLM’s investor relations page.

Air France-KLM looks set to have a decent 2019 overall, which continues a trend of steady revenues and fluctuating net income that is reflected in the results that the airline has reported over the past five years. Incidentally, the negative net income figures for 2014 were due to strikes that protested shifting their short-haul and domestic service to Transavia, their low-cost Dutch subsidiary – showing the recurring nature of strikes as an issue for the business.

Year Revenue (€) Revenue ($) Net Income (€) Net Income (€)
2014 24.91 billion 27.97 billion -221 million -248.12 million
2015 25.69 billion 28.84 billion 79 million 88.69 million
2016 24.84 billion 27.89 billion 497 million 557.98 million
2017 25.86 billion 29.03 billion 146 million 163.91 million
2018 26.51 billion 29.76 billion 372 million 417.64 million

Figures collated from annual reports on Air France-KLM’s investor relations page.

These figures would suggest that neither the strikes nor the fuel price rises have greatly impacted Air France-KLM, and long-term that is the case. Given these figures, and the fact that the stock is trading around the $10 range with a price-to-earnings ratio of 14.48, a prospective investor could certainly think that Air France-KLM would make a fine addition to their portfolio.

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Air-France KLM is the only airline with two hubs at Europe’s major airports. Image provi

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