ATW Daily News

AF KLM maintenance units anticipate positive FY despite downturn

Monday June 29, 2009

Air France Industries and KLM Engineering & Maintenance are confident they will be able to maintain a positive operating result this year despite the downturn in the airline industry and consequent contraction of MRO contracts. "It will be a challenge, and results could be affected by the currency exchange rates, but we believe we are well positioned to sustain our operational performance," AFI President Alain Bassil told ATWOnline at the Paris Air Show earlier this month.

AFI and KLM E&M combined posted a 51% year-over-year increase in operating income to €95 million ($132.5 million) for the fiscal year ended March 31 owing mainly to strong activity in their higher margin engine and component support activities. Revenue inched up 0.5% to €2.98 billion. Third-party work represented 34% of revenue and was up 3% on the prior year. "The crisis is giving rise to new opportunities that can offset the market downturn," Bassil stated. He explained that owing to the recession, some airlines are forced to postpone investment in fleet renewal and continue to operate aircraft that have reached maturity and need more maintenance, while carriers lacking the critical competitive mass to carry out some maintenance tasks increasingly are turning to subcontracting.

A third pocket of growth is in emerging markets, "where recent aircraft in operation are starting to age and hence need more and more maintenance," he said. Regions with growth perspectives include the Middle East, India and China. KLM E&M Executive VP Peter de Swert contended that growth also will come from taking market share from independent MRO providers "because they do not have their own fleet as a stable basis for activity and thus they are more exposed to the crisis." On the other hand, OEMs are stepping up their after-sales efforts in order to offset falling sales and margins, he noted.

The MRO division of the Air France KLM Group earlier this month launched a common website detailing joint offerings and solutions. But for the time being AFI and KLM E&M will maintain their own brands. "It is very difficult to find a new name for two companies that have a very strong brand recognition in the market," Head of Sales Rob Pruim said.

by Cathy Buyck

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