Fundamental analysis
Air France – KLM is a holding group that owns Air France and its subsidiaries (Air France cargo, HOP and others) and KLM and its subsidiaries (KLM cargo, Cityhopper, Transavia and others). The group has stakes in other airlines around the world (e.g. 20% in Scandinavian airlines, 8% in Kenya Airways and others).
The company was formed in 2004 by the merger of KLM and Air France.
The main shareholders of the group are:
– 28,6 % French State
– 9,3 % Kingdom of the Netherlands
– 9 % CMA (French logistics company)
– 4,7 % China Eastern Airlines
– 2,9 % Delta Air Lines
The number of employees is over 77 000.
As of 31 December 2023, the Group had 551 aircraft, ranging from small regional to wide-body long-haul aircraft. The average age of the fleet is 12 years.
For the year 2023, the company operated at 93% of its pre-lead capacity with a seat occupancy rate of 87%. The operating margin was 5.7%.
Turnover increased to €30 billion (+14% compared to 2022).
Net profit was €900 million.
Comparing the returns of US airlines and the S&P 500, the return is as follows.
1 year: airlines have a return of +20.8%, the S&P 32.6%.
Over the last 5 years: airlines have a loss of -21.6%, the S&P 500 has a return of 94.5%.
Air France KLM shares have lost 34.72% in 1 year. Since its subscription in 2004, the stock has lost 91% of its price.
Results
For 2Q 2024, the company had an operating profit of €513 million with an operating margin of 6.5%. Operating profit was down by Euro 220 million compared to 2Q 2023.
Capacity was up 4.1% and occupancy was 88%.
The Olympics in France had a negative impact, with passengers avoiding France. The Group valued this drop in sales at 40 million Euro.
The company carried 25.7 million passengers.
Technical analysis
The company has been in a solid decline for several years. The moving averages crossed into a downtrend in April 2023 after a brief pause when the price was stagnant rather than rising.
The RSI is in the neutral zone.
The nearest resistance is around the price of €10.50 per share.
Conclusion
European airlines are not doing well and Air France KLM is living proof of that. Market fragmentation, high fixed costs and market rigidities are proof that as a network carrier you have a tough time in Europe. The fact that the company has not yet reached its pre-capacity is proof of that. The financial indicators show an operating profit, but it is very volatile. Even comparing the sector’s returns with the S&P500, there is a gaping difference in earnings (21% loss vs. 94% return).
According to technical analysis, the company has been in decline for more than 16 months. The question is how long this trend can continue.