The group expects to fly at 40% of pre-crisis capacity in the first quarter and warned of a deeper hit to earnings before interest, taxes, depreciation and amortization (EBITDA) than its 407 million-euro loss in the last three months of 2020.

The past year has “tested the Air France-KLM Group with the most severe crisis ever experienced by the air transport industry,” Chief Executive Ben Smith said as the group also deferred a key mid-term profitabilty goal.

The worsening travel outlook and tightening restrictions threaten to ruin Europe’s critical summer season and leave major carriers in need of another round of funding support, analysts warn.

Air France-KLM last year received 10.4 billion euros in loans and guarantees from France and the Netherlands and is negotiating a state-backed recapitalisation, with EU regulators seeking airport slot concessions at Paris-Orly and Amsterdam-Schiphol.

The Air France business recorded a 989 million-euro quarterly operating loss, more than six times wider than KLM’s 152 million-euro deficit. Performance disparities have in the past sharpened tensions between the airlines and their government shareholders.

The group signalled a postponement of the 7-8% operating-margin goal previously pushed back a year to 2025, giving no new date for the “unchanged but delayed” target.

Air France-KLM cut its workforce by 10% or 8,700 full time-equivalent positions in 2020 and expects to eliminate a further 6,000 “in coming years”, it said.

The cargo business, a bright spot for many airlines as grounded flights push up freight prices, saw unit revenues more than double last quarter. Air France-KLM said it still expects a passenger traffic recovery to begin before the summer vacation months, as vaccines roll out.

The quarterly net loss of 1 billion euros was smaller than the 1.31 billion analysts expected, according to the company’s consensus polling. Revenue fell 64.3% to 2.36 billion euros on a 78% traffic decline.

More than 2 billion euros in combined restructuring charges, aircraft depreciation and fuel hedging losses also weighed on the full-year bottom line.

Operating cash flow was a negative 2.12 billion euros last quarter, and net debt increased by 4.9 billion over the year to 11.05 billion as of Dec. 31, against 9.8 billion in liquidity.

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