GE CF6 engine AFI KLM E&M

Competition Creating Third-party Revenue Headwinds at AFI-KLM

Growth through acquisition remains key strategy.

Stiffer competition helped third-party revenue at Air France Industries KLM Engineering & Maintenance (AFI KLM E&M) decline 1.5% in the third quarter, adjusting for currency fluctuations, to €462 million ($535.7 million), parent Air France KLM Group reports.

"It seems that there is a stronger pressure coming from the competition," group CFO Frédéric Gagey told analysts on a Nov. 3 earnings call. "So the idea is we have to grow in terms of [revenue], but to be sure that the margin will continue to improve or at least will not deteriorate."

Margins for the quarter was 7.1%, down 0.1%, the company reported.

For the year to date through Sept. 30, third-party constant-currency revenues were up 0.6% to just less than €1.4 billion. Work from outside of the group accounted for 44% of total AFI KLM E&M sales, the company says. Third-party revenue grew 16% and was 43% of sales in calendar-year 2016.

Bigger-picture, the MRO arm's order book stands at about $10.4 billion, and was bolstered by a shift from deals on mature platforms to newer models. Engine and component work continues to be AFI KLM E&M's primary focus, as is expanding its footprint through acquisitions.

"We continue to be active in [mergers and acquisitions] concerning" the aftermarket, Gagey says. "We have some projects to buy shops around the world in order to establish the footprint."

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