AF-KLM Increases Cost Savings Target

Air France-KLM has further increased its cost savings goal for the fiscal year, after already boosting the target several months ago.

The new cost savings target for the 2008-09 period is EUR630 million, compared to the original target EUR430 million. Air France-KLM management indicated at the start of the fiscal year it would add EUR150 million to the original target, but has now increased that to EUR170 million, says Air France-KLM CFO Philippe Calavia. Furthermore, EUR20 million was added by adjusting the savings seen possible from the baseline plan, he adds.

The main contributors are reducing hiring and using staff more efficiently and greater efficiencies by having Air France and KLM engage in joint purchasing.

In the first quarter, the airlines already generated EUR114 million of those savings, or around 2.3% of costs, although that was largely offset by an inflation rate of more than 3%.

Air France-KLM also hopes to accelerate other revenue enhancements by quickly implementing joint venture activities with U.S. partners. Air France Chief Operating Officer Pierre Henri Gourgeon says the paperwork will be done quickly to ensure that the four way joint venture between Air France, KLM, Delta and Northwest to cooperate on transatlantic routes is operational in time for the summer season.