Air France

Air France’s Olympic Headache

Gordon Smith and Jay Shabat
July 5th, 2024 at 8:51 AM EDT

An Air France logo on the exterior of a building

Skift Take

Gordon Smith and Jay Shabat examine why this summer’s Olympic and Paralympic Games in Paris are likely to be a financial drag on Air France.

In part one of this week’s podcast, Gordon Smith and Jay Shabat examine why this summer’s Olympic and Paralympic Games in Paris are likely to be a financial drag on Air France. In part two, we turn our attention to U.S. airlines and ask what the second half of 2024 could hold for some of the country’s biggest carriers.

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Key Points: Air France and the Olympics Impact

  1. Olympic Disruption: Air France expects a revenue hit of €160-€180 million ($175-$200 million) for Q3 due to international markets avoiding Paris during the Olympics.
  2. KLM Insights: KLM CEO noted a decline in Paris-bound passengers, with potential shifts to Amsterdam as an alternative hub.
  3. Airline Challenges with Major Events: Airlines, including Air France, generally find large events like the Olympics disruptive and not as profitable, contrary to what might be expected.
  4. Long-term Benefits: Infrastructure improvements (e.g., Orly Airport upgrades) may benefit Air France KLM long-term, despite short-term disruptions.

Key Points: Outlook for US Airlines in H2 2024

  1. Cost Increases: U.S. airlines face significantly higher operating compared to pre-pandemic levels, with labor costs in particular rising faster than revenues.
  2. Delta’s Position: Delta is expected to perform well, driven by strong premium demand and international routes, though it still faces higher costs.
  3. Spirit Airlines’ Struggles: Spirit has increased capacity and revenue but suffers from a disproportionate rise in costs, especially labor, leading to financial difficulties.
  4. Growth and Efficiency: To combat rising costs, airlines aim to grow capacity and improve efficiency, although supply constraints (e.g., aircraft availability) pose challenges.
  5. Premium Demand: A trend towards more premium offerings in both long-haul and short-haul markets is evident, with airlines betting on sustained demand for higher-margin products.
Gordon Smith and Jay Shabat
July 5th, 2024 at 8:51 AM EDT

Tags: Air France Air France-KLM

Photo credit: Exterior of an Air France office in Bordeaux, France.  Adobe Stock / OceanProd

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