July 30, 2020 / 6:13 PM / 4 days ago

UPDATE 1-Air France-KLM plans 'careful' ramp-up after Q2 loss

(Adds details, comments, background)

By Laurence Frost

PARIS, July 30 (Reuters) - Air France-KLM said on Thursday it aims to operate at two-thirds of capacity before the end of the year, as it navigates the effects of the coronavirus crisis that led to a 1.55 billion euro ($1.8 billion) quarterly operating loss.

Over the crucial summer months, the Franco-Dutch airline group now expects to run 45% of the third-quarter capacity flown a year earlier - rising to 65% for the fourth quarter.

Air France, KLM and the group's other airline brands were "carefully increasing capacity for the summer months", the company said in a statement.

Hopes for a European travel rebound have improved since the height of COVID-19 lockdowns in May, when Air France-KLM had predicted an 80% capacity contraction for the summer.

But the outlook remains fragile. The British government, whose surprise move to quarantine Spanish arrivals has rattled the travel sector, says it may soon extend restrictions to other countries where infections are rising again.

In the second quarter, Air France-KLM operated about 12% of its year-earlier flights, based on seats and distance flown.

"In conditions like that it's no surprise that revenue fell 83%," Chief Financial Officer Frederic Gagey said. The group's operating loss and 1.18 billion euros in revenue were broadly in line with the company-compiled analyst consensus.

Air France-KLM, which has received a combined 10.4 billion in bailout loans issued or guaranteed by the French and Dutch governments, also posted a 2.61 billion euro net loss swelled by asset impairments for early retirement of idled planes and fuel-hedging losses exacerbated by the shutdown.

Capital expenditure would be reduced by another 300 million euros to 2.1 billion euros in 2020, the company said, increasing to 1.5 billion the total cut since the crisis.

The net loss, which compares with a 97 million euro year-earlier profit, also reflects a 188 million-euro provision for restructuring at KLM, expected to announce further headcount reductions on Friday.

Air France and its HOP! short-haul arm are cutting 7,580 jobs under plans unveiled this month. ($1 = 0.8475 euros) (Reporting by Laurence Frost; Additional reporting by Toby Sterling in Amsterdam; Editing by Jan Harvey and Alex Richardson)

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