Air France-KLM issued a warning on Monday that the Olympic Games could result in a revenue loss of up to 180 million euros ($193 million) due to a decrease in travel to Paris during the summer. The airline group had anticipated a positive impact on its brand image and financial performance from the Games, but there are worries that the event might deter other tourists from visiting Paris, a prime summer tourist spot.
The airline stated in a release, "International markets demonstrate a notable avoidance of Paris." It also noted that travel between Paris and other locations is below the typical June-August average, as French residents appear to be delaying their holidays until after the Olympics or opting for different travel destinations.
Although the French aviation trade association Fnam could not confirm that tourists are shunning Paris, Air France-KLM's announcement aligns with recent data from the Paris tourism office. The office recently predicted a 14.8 percent decline in foreign arrivals in July compared to last year and a 16.4 percent decrease from 2019. Additionally, hotel occupancy in the first ten days of July averaged 60 percent, a drop of about 10 percentage points from last year.
Approximately 15 million visitors are expected to attend the Games, including two million from abroad, according to the Centre for Law and Economy of Sport (CDES), which has been monitoring the Paris Games for the IOC and the Paris 2024 organizers. Despite the projected negative impact on revenues for the June to August 2024 period, Air France-KLM has no plans to reduce capacity. The airline will provide further details when it announces its half-year results on July 25th.
Air France-KLM's shares fell by 3.7 percent in late morning trading, significantly underperforming the Paris stock exchange's blue-chip CAC 40 index, which rose by 1.5 percent. The airline's shares are currently trading at a ten-year low. As recently as April, Air France-KLM was discussing promising ticket sales for the summer and aimed to increase its seat capacity by five percent from the previous summer. Air France, an official partner of the Paris Olympic and Paralympic Games, had planned to use the events to enhance its brand and showcase its services. The airline has hired hundreds of temporary staff to facilitate smooth travel for athletes and their equipment.
The airline anticipates transporting around a fifth of the Olympic athletes and just over a third of the Paralympic athletes. In early June, the airline's CEO, Anne Rigail, stated that the company would reach its pre-pandemic activity level for the first time this summer. The June-August quarter is a critical financial period for airlines in the northern hemisphere, as the summer vacation season significantly contributes to their profits. Last year, Air France-KLM reported a net profit of 931 million euros in the third quarter, nearly matching its record annual earnings. Monday's warning follows a challenging year for Air France-KLM, which lost 522 million euros in the first quarter due to rising costs and geopolitical tensions, despite an increase in passengers and ticket prices. The group has initiated a cost-cutting plan, including a hiring freeze for administrative and non-operational staff.
