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December 11, 2015

In its monthly traffic update released on December 8, 2015, Air France-KLM announced that the airline lost around EUR 50 million (USD 54 million) in revenue due to the Paris terror attacks which significantly impacted passenger volumes to and from the French capital. Many customers canceled their tickets after the Islamic State (IS) terrorists killed 130 people in Paris on November 13. The airline expects the negative effect to be over by late December. Moreover, the impact was concentrated on the local traffic to and from Paris. Several other airlines like Ryanair and Scandinavian carrier SAS have also reported a dip in travel demand to Paris and Brussels. 

Analyst Comment: In earlier issues of Insights, Pinkerton assessed the November 13 Paris attacks will have a negative effect on tourists and air travelers, particularly on routes to Paris. The demand is likely to improve during the holiday period between Christmas and the New Year. But the demand in the French tourism industry which accounts for 7% of gross domestic product likely will remain muted in the short term due to the terror threat. A dip in tourism revenue will impact the sluggish recovery and overall health of the French economy and job creation. Pinkerton also assesses that the declined revenues of Air France-KLM could have a marginal impact on its over all value. The company suffered a loss of EUR 198 million (USD 216 million) in 2014, which reportedly was an improvement to the EUR 1.8 billion (USD 1.96 billion) loss it suffered in 2013. Air France-KLM also wants to reduce costs by about 1.5% annually between 2015 and 2017. 

Prepared by: Ajay Vaishnav, India  

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