Views on AFKL 2017 financial results
Feb 20, 2018 | 12:57 am
#1
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Views on AFKL 2017 financial results
As usual, I would like to add my pinch of salt on the recent financial presentation of AFKL.
There are good news and a few more worrisome ones.
1. The operating profit is increasing dramatically by some 40% over 2016.
2. There is a net loss of 275 compared to a profit of 792 in 2016. This is due to a "de-recognition of KLM pension assets", which AFKL interestingly calls "de-risking". Thus a loss of close to 1,900 is recognized.. One can argue about the philosophical/conceptual impact of this one-off pension revaluation, but it is a bad hit for AFKL.
3. Operating margins have improved. A problem is the disparity between AF and KL. Although AF is a 50% bigger airline than KLM it contributes much less to operating income (588 vs 910). Full year operating margin for AF is a weak 3.7% (improvement of 1.3% over 2016), while KLM has a good operating margin of 8.8% (improvement of 1.9% over 2016). The fourth quarter 2017 (typically a bad quarter) is even more worrying as AF margin is down to 1.1% (a drop of 0.1% from fourth quarter 2016), while KLM is at 2.8% (a gain of 0.6%). KLM is over twice more profitable than AF and the trend is not a narrowing of the difference.The forthcoming industrial action at AF is out of line.
4. AFKL got a capital increase from Delta and China Eastern. It helps salvage a dangerous leverage ratio. Hopefully the appointment to the Board of Mattson and Tang will bring some international expertise to bring light to the many board members who are French civil servants or union representatives.
There are good news and a few more worrisome ones.
1. The operating profit is increasing dramatically by some 40% over 2016.
2. There is a net loss of 275 compared to a profit of 792 in 2016. This is due to a "de-recognition of KLM pension assets", which AFKL interestingly calls "de-risking". Thus a loss of close to 1,900 is recognized.. One can argue about the philosophical/conceptual impact of this one-off pension revaluation, but it is a bad hit for AFKL.
3. Operating margins have improved. A problem is the disparity between AF and KL. Although AF is a 50% bigger airline than KLM it contributes much less to operating income (588 vs 910). Full year operating margin for AF is a weak 3.7% (improvement of 1.3% over 2016), while KLM has a good operating margin of 8.8% (improvement of 1.9% over 2016). The fourth quarter 2017 (typically a bad quarter) is even more worrying as AF margin is down to 1.1% (a drop of 0.1% from fourth quarter 2016), while KLM is at 2.8% (a gain of 0.6%). KLM is over twice more profitable than AF and the trend is not a narrowing of the difference.The forthcoming industrial action at AF is out of line.
4. AFKL got a capital increase from Delta and China Eastern. It helps salvage a dangerous leverage ratio. Hopefully the appointment to the Board of Mattson and Tang will bring some international expertise to bring light to the many board members who are French civil servants or union representatives.
Last edited by brunos; Feb 20, 2018 at 1:32 am
