Air France-KLM narrows losses

Air France-KLM has narrowed its full-year loss, beating analyst estimates, after a capacity freeze boosted average fares and the airline reduced its headcount by 3,300 over the year.

The Paris-based company had an operating loss of €300 million in 2012, compared with €353 million a year earlier, it said yesterday.

Air France-KLM chief executive officer Jean-Cyril Spinetta (right) is eliminating 5,000 jobs at the company’s French arm and 1,300 more at the smaller Dutch unit. Capacity rose just 0.6 per cent in the year, helping to lift unit revenue, a measure reflecting fares, by 5.9 per cent.

“Pricing is good and I’d expect that to continue as the industry benefits from capacity restraint,” said Donal O’Neill, an analyst at Goodbody Stockbrokers in Dublin.

“Staff costs should come through later this year but a lot of positivity from the restructuring is built in and there’s not much low-hanging fruit now, so they could struggle to surprise on the upside.”

Air France-KLM chief financial officer Philippe Calavia said the economic backdrop in 2012 was mediocre, “but capacity was well managed, nicely contained, and it is thanks to that that we managed to increase unit revenues”. He added that the context “is too uncertain” to make predictions for 2013.

Air France-KLM had an annual net loss of €1.19 billion from €809 million a year earlier after fuel costs rose by €890 million to €7.44 billion and the company booked €471 million of restructuring costs. Net debt was cut by €500 million to €6 billion in the year and unit costs fell 0.9 per cent in the fourth quarter at constant rates.

Capacity restraint would continue, with the company planning to increase seating by no more than 1.5 per cent, it said.

Air France-KLM is seeking to fend off the likes of EasyJet in the European short-haul market while competing with British Airways and Deutsche Lufthansa and Gulf rivals, including Dubai-based Emirates, on long-haul routes. – (Bloomberg)