Goldorak

Yes, agreed. For the A332 fleet, I hope they will will finish the retrofit because there's only one plane left not started (+ 2 on-going).

San Gottardo

But that is precisely where the equation won�t work any more: many planes on the ground/more than planned, not generating any cash, cash that is missing for the refurbishment.

I am quite pessimistic for a sustained refurbishment program.

gkl

I understand that liquidity is a concern in the short-term, however companies which invest in times of a crisis will come back stronger afterwards. I understand that they cannot run the full refurbishment program now, however when we see demand coming back gradually, they should use the incoming cash-flow from operations for investments in the still grounded part of the fleet.

Bullspread

One of the advantage when planes are stuck on the ground is that retrofitting erase the costs of opportunity as they cannot fly

Goldorak

It's not a crisis that airlines are facing, but apocalypse...

brunos

As Goldorak stated this is Apocalypse Now.
What is very worrying is the future. A common guess is that this is not a blip, but will lead to structural changes in the airline industry and the way people travel. Leaner fleets are likely.

mlin32

+1. I don't think the airline industry will recover thru the end of this year at all, even if the situation improves. People won't look at travel the same way, and airlines will probably continue to defer deliveries of new aircraft and refurbishments. It's not like AF/KLM was sitting on a huge pile of free cash to begin with before this mess started.

San Gottardo

Except that "opportunity cost" doesn't require cash. Refurbishing a plane does. I don't know how they treat those programs from an accounting perspective, but I assume those cabins are depreciated over time, so the net income impact can be "buffered" (calling Professor brunos for help). But Air France still needs to pay the invoice of the company doing the refurbishment. Even if things turn out very well and airline travel rebounds then all the revenue generated then will be needed to pay off huge debt (looks like the French and Dutch governments will guarantee some massive loans), and reduce the FY loss. And on the cash side, it will be kept to (re-)create a buffer after current cash reserves are depleted in the months of March-May.

So the best thing we can hope for is that AF sends the non-refurbished planes to the desert (A380, A340, the NEV4-777s) and only keeps the refurbished ones flying. That way the likelihood of being on a plane with a refurbished cabin will increase dramatically.

brunos

I fully agree with you. Accounting conventions have little relevance today, so I won't comment on accounting.

It is interesting to see how airlines are being bailed out in different countries.
Many countries logically seem to direct funding/bailout to the companies themselves, often with strings attached regarding employment. The companies are the employers. It seems logical and giving them more flexibility to go that route. France seems to be subsidizing employees directly, at some minimum level. Hence, more funding will be needed for a lot of French companies. As typical in a former socialist State, France is talking about nationalizing Air France. If we see what is happening with SNCF, this does not seem like a great idea. In any case,AF will need to severely downsize as the next couple of years will be tough. A fifty percent capacity in 2021 compared to 2019 might be a reasonable plan, unless some health miracle happens.

Just my usual controversial two cents.

NickB

I generally agree with your post but I think that we should avoid easy caricatures here. I doubt that one would describe the UK as a "former socialist State". Yet, nationalisations, or partial and temporary nationalisations, are part of the arsenal of measures which are also contemplated by the UK, and were in fact used in relation to the banking sector in the 2008 financial crisis or in relation to the railways in the current covid19 crisis with the cancellation of all rail franchises (incidentally, for anybody tempted to indulge in simplistic "state and nationalisations=bad; private sector and privatisations=good", just have a look at the disaster zone that UK railways are).

In situations of profound crisis like the current one, temporary nationalisations can be a sensible way forward. From a public acceptability perspective, asking shareholders to take a haircut in return for state aid, which partial or total nationalisations often entails, can also be a sensible move.

Bullspread

article today in French press : AF stopped regular maintenance and retrofits of cabins.
Only the maintenance occurred by forced parked aircraft is processed.

San Gottardo

There we go. Anything else would have been a surprise.

harer92

could anyone copy and paste the article as i am unable to find it. Thanks.

Sjondorn

Let's simply not forget that right now retrofitting the aircraft isn't a "essential business" and can't be done while working from home. While it does make sense to retrofit the aircrafts when they are on the ground it's something to resume once the lockdown restrictions are lifted. It will still take some time for travel to pick up again after that.

canadavid

I do not intend to have a flight in P but I wonder if only 19 aircraft with 4 P seats is enough to maintain it as a product in case A380 are retired sooner than expected?
How many seats are offered by the competition which offers P class ?