AF-KLM targets €700m sale and leasebacks under 2012-14 plan

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Air France-KLM intends to generate €700 million ($898 million) in sale and leaseback transactions under its new 2012-14 transformation plan, with €500 million targeted this year.

The Franco-Dutch group yesterday outlined details of a new wide-ranging three-year plan to return it to profitability, under which the group will restructure short and medium-haul operations as well cutting costs and debt. The programme involves two parts - €1 billion in immediate cost cutting, followed by a €1 billion transformation plan.

Both are designed to generate €2 billion in free cash flow over the next three years as the AF-KLM board prioritises trimming debt to €4.5 billion by the end of 2014, from €6.5 billion currently.

Under its 2012-14 plan, the Franco-Dutch group will restrict capacity growth to 5% and defer some deliveries and not exercise some options in order to keep its net investment programme at €4.8 billion - €1 billion less than previously envisioned. Air France-KLM will target €1.6 billion in net investment this year, €1.7 billion in 2013 and €1.5 billion in 2014.

According to Flightglobal's Ascend Online database, Air France has 18 aircraft on order: five Airbus A320s to be delivered in 2012, six A380s scheduled for delivery through July 2013 as well as seven Boeing 777-300ERs planned through June 2013.

KLM has two Airbus A330-300s scheduled for delivery in the first quarter of this year, with the first aircraft being leased from Air Lease. It also has two 777-300ERs planned for delivery in June and July 2012.

The Franco-Dutch group's order, firmed earlier this week, for 25 Boeing 787-9 aircraft sees deliveries over a seven-year period starting in 2016. Air France-KLM has yet to finalise a similar agreement with Airbus for A350-900s as part of its announcement of orders for 110 widebodies made last September.