Air France-KLM warned Monday that the Olympic Games would lead to a drop in revenues of up to 180 million euros ($193 million), due to a decline in travel to Paris over the summer.
The airline group had been hoping for a boost to its brand image and bottom line from the Games, but there have been concerns that the Games may keep other travellers from visiting Paris, which is a major tourist destination during the summer.
“International markets show a significant avoidance of Paris,” the airline said in a statement.
“Travel between the city and other destinations is also below the usual June-August average as residents in France seem to be postponing their holidays until after the Olympic Games or considering alternative travel plans,” it added.
While the French aviation trade association Fnam said it couldn’t confirm tourists were avoiding Paris, Air France-KLM’s statement is in line with the latest data from the Paris tourism office.
It recently forecast a 14.8 percent drop in foreign arrivals in July compared to last year and a 16.4 percent drop from 2019.
Meanwhile, hotel occupancy in the first 10 days of July is on average 60 percent, a drop of around 10 percentage points from last year.
Some 15 million visitors are predicted 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 organisers.
Air France-KLM said it has no plan to scale back capacity, despite the estimates of negative impact on its revenues for the June until August 2024 period.
It said it would provide more details when presenting half year results on July 25th.
“Travel to and from France is expected to normalise after the Olympic Games, with encouraging demand levels projected for the end of August and the month of September,” it added.
Air France-KLM shares tumbled 3.7 percent in late morning trading — far below the Paris stock exchanges’ blue-chip CAC 40 index which was up 1.5 percent, on relief the far right did not win an outright parliamentary majority in the first round of parliamentary elections over the weekend.
The airline’s shares are trading around a 10-year low.
As late as April Air France-KLM was talking about promising ticket sales levels for the summer and said it aimed to boost its seat capacity by five percent from the previous summer.
One of the official partners of the Paris Olympic and Paralympic Games, Air France had said plans to use the events to boost its brand and show off its services. It has hired hundreds of temporary staff to help ensure smooth travel for athletes and their equipment.
The airline expects to transport around a fifth of the Olympic athletes and just over a third of the Paralympic athletes.
At the beginning of June, the airline’s chief Anne Rigail said it would hit this summer the level of its pre-pandemic activity for the first time.
The June-August quarter is a crucial period financially for airlines in the northern hemisphere as summer vacation season helps them generate much if not most of their profits.
Last year, Airbus-KLM posted a net profit of 931 million euros in the third quarter, nearly the exact amount of its record annual earnings.
Monday’s warning came as AirFrance-KLM has struggled this year, losing 522 million euros in the first quarter on rising costs and geopolitical tensions despite a higher number of passengers and higher ticket prices.
The group has launched a cost-cutting plan including a hiring freeze for administrative and non-operational staff.