Air France-KLM jumped the most in nine months in Paris trading after the airline group promised profitability beyond its current target.

The operating margin will exceed 8 per cent between 2026 and 2028, the Franco-Dutch airline group said on Thursday (Dec 14) in a statement ahead of a meeting with investors. The goal compares with a medium-term prediction of a margin of 7 per cent to 8 per cent, last issued during the first-half results.

The stock jumped as much as 7.9 per cent, the most since Feb 17, bringing the gain this year to 5.8 per cent. 

The airline industry is ending the year on a high as it continues to benefit from travellers splurging on flights, particularly leisure passengers treating themselves to expensive seats in the front of the cabin. Global airlines are poised to generate record revenue this year and will extend the gains in 2024, the International Air Transport Association said earlier this month.

“We are now well positioned to accelerate further and capture the full potential of our Group’s assets to deliver sustained and more profitable growth,” Air France-KLM chief executive officer Ben Smith said in the statement.

Air France-KLM estimated net capital expenditures of as much as 3.5 billion euros (S$5.07 billion) each year between 2024 and 2026, and of as much as 3.8 billion euros per year in 2027 and 2028 as it invests in fleet upgrades and maintenance of aircraft. The operating result is set to improve by 2 billion euros over the next five years across all businesses, Air France-KLM said.

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The margin target is roughly in line with the goal set by German rival Deutsche Lufthansa, which also wants to achieve a profitability goal of at least 8 per cent in 2024.

While Air France-KLM shares surged on the prospect of improved operating margins, British Airways parent IAG in November saw its stock price slump after setting medium-term targets of an operating margin of 12 per cent to 15 per cent. Investors faulted the airline group for not providing a clearer timeline on when it might resume dividend payments.

“Air France-KLM has made huge strides in improving profitability since its pre-pandemic days, with margins coming closer to those of other legacy carriers,” said Alex Irving, an analyst at Bernstein. “This was the fruit of a far-reaching restructuring programme: union relations have been fixed, loss-making routes slashed, and fleet simplification begun. BLOOMBERG