Air France cuts profit forecast on overcapacity, lower prices

[PARIS] Air France KLM said its 2014 profits could be as much as 12 per cent lower than previously predicted, mainly as a result of overcapacity and resulting weak prices in both the passenger and cargo sectors.

Joining other airlines that have also flagged overcapacity as a drag on earnings, the French-Dutch carrier stressed that the lower result, at 2.2-2.3 billion euros (S$3.7-3.9 billion), down from the previous guidance of 2.5 billion euros, still represented a 20 per cent improvement on 2013 earnings before interest depreciation and amortisation (Ebitda).

"While not representing a turning point in market trends, the June traffic figures published today as well as bookings for July and August nevertheless reflect the overcapacity on certain long-haul routes, notably North America and Asia, with the attendant impact on yields," the airline said in its monthly traffic statement ahead of results due later this month.