Air France-KLM Profit Warning

Jun 21st, 2015
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Tufts University
Course: general
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This case study traces the recent profit warning of Air France-KLM and the stock market reactions with respect to market efficiency, In section two, fundamental analysis is performed based on key performance indicators to assess the strength of airlines in the market.

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Air France-KLM Profit WarningThis case study is based on the concept of the market efficiency in relation to the profit warning of Air France-KLM, a merged leading European Airlines in February 2011.IntroductionAir France- KLM, leading European airlines issued a profit warning that it would not meet annual operating target of 300m Euros. Chief executive officer pointed out this was due to increased capacity because of adverse weather conditions, traffic control strikes which caused 6900 flight cancellation during the third quarter and increase in oil prices. As a result stock market pushed the share price downwards by 8%. Most of the above problem indicators are common to airline industry proved by IATAs prediction of lower outlook of airline industry due to rising oil price this year.Air France- KLM is a merger of Socit Air France S.A. (Air France) and Koninklijke Luchtvaart Maatschappij N.V. (KLM) in 2004. The revenue generating activities are passenger transportation (80% of revenue), cargo transportation (12% ) and aircraft maintenance and overhaul services (5%), they secured a leading position for passenger transport in Europe and a global leader in cargo transportation. The changes to capital structures during the nine month period ended to 31 December 2010 are debt reduced from 6.22 euro billion to 6.06 euro billion whilst equity sharply increased from 5.42 euro billion to euro 7.03 billion. In additio

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