Air France-KLM quarterly profit drops 30% on high costs
The group expects unit costs to rise 2 per cent in 2024 compared with the previous year
AIRLINE group Air France KLM reported a 30 per cent drop in quarterly operating profit on Thursday (Jul 25) that was worse than analysts expected, citing unit costs and higher fuel prices that also exerted pressure on revenue across the broader sector.
Operating profit in the second quarter decreased by 220 million euros (S$320.2 million) to 513 million euros compared with last year, below the 547 million euros expected in a company-provided consensus of analyst forecasts.
Shares fell 1.8 per cent in morning trading.
The company said higher costs came from salaries linked to labour agreements at both Air France and KLM, and higher tariffs at Amsterdam Schiphol and Paris airports.
The group said it expected unit costs – the average cost of flying an aircraft seat one mile – to rise 2 per cent in 2024 compared with the previous year, against 1-2 per cent estimated previously.
It trimmed its annual capacity forecast to a 4 per cent rise, from 5 per cent previously.
Air France KLM said it had taken robust measures to cut costs since April, including a hiring freeze for support staff.
Cuts in marketing expenses and a 20 per cent reduction of discretionary costs should be implemented the rest of this year, it said.
Revenues grew 4.3 per cent to 7.95 billion euros between the months of April and June, as expected, though the company noted that the impending Olympic Games in Paris has had a 40 million euro impact. The group had issued a profit warning earlier this month, as the Games – from July 26 to Aug 11 – spurred some people to rethink their travel plans. REUTERS
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