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Air France-KLM warns of profit fall

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"The year started well in commercial terms, demand was there," says Mr Gagey of Air France- KLM.

Paris

AIR FRANCE-KLM said it expected profits to fall this year due to the effect of strikes at its main French unit, which are forcing it to rein in growth and mean it cannot take advantage of a generally benign backdrop for airlines.

European airlines are currently enjoying high demand for tickets thanks to robust economies, which has helped to ease the pressure on fares. However, Air France-KLM said on Friday that its first-quarter loss had widened to 118 million euros (S$187.8 million), against a restated loss of 33 million euros a year ago.

The results came as Air France staff staged a 13th day of walkouts this year and come hours ahead of a crunch ballot for the group's chief executive, who has said it would be hard for him to stay if staff vote against the pay proposal.

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"What I regret is that the year started well in commercial terms, demand was there," chief financial officer Frederic Gagey told journalists. "It's a great shame, and I think a majority of Air France staff feels this way too, that we are not able to take advantage of this environment."

Reflecting the benign market backdrop, profits at the KLM unit, which typically has a lower cost base and therefore achieves higher profit margins than the Air France business, improved by 32 million euros to 60 million euros. Overall group unit costs in the quarter rose 2.1 per cent, of which 1.7 per cent was related to the strikes. REUTERS