Air France-KLM aims for return of dividend, fatter margins

Paris: Air France-KLM plans to improve profitability and pay a dividend as part of a five-year plan to regain ground lost to European rivals.

The airline will “increase revenues to significantly improve our operating margin,” Chief Executive Officer Ben Smith said on Tuesday in a statement.

Smith’s goals include reaching a medium-term operating margin of 7 per cent to 8 per cent, achieving positive cash flow and resuming payouts to investors, which were last made in 2008. The shares fell as much as 2.7 per cent in early trading in Paris.

The long-awaited road map takes the wraps off of Smith’s ambitions for the carrier, which lags behind British Airways-owner IAG SA and Lufthansa AG on a number of financial measures. When Smith took the helm more than a year ago, Air France-KLM was struggling from months of labour unrest and deep divisions within its workforce in France.

Under his plan, the airline will focus on three brands, Air France, KLM and low-cost Transavia and its hubs in Paris and Amsterdam as well as “pragmatically analysing consolidation opportunities.”

Smith wants Transavia to become the leading low-cost airline in France, where Ryanair Holdings Plc and easyJet Plc have made inroads. He didn’t mention Air France’s struggling domestic operations.

The Canadian national scored early victories by signing agreements and pay rises with French and Dutch labour unions. More recently, lower third-quarter earnings disappointed investors as the economic slowdown, trade tensions and higher fuel costs showed the fragility of a nascent turnaround.