Air France-KLM profit falls 6.7% in third quarter

Chief executive pledges to pursue ‘ambitious and innovative strategy’

Photograph: Eric Gaillard/File Photo/Reuters

Photograph: Eric Gaillard/File Photo/Reuters

 

Air France-KLM group chief executive Ben Smith pledged to pursue an “ambitious and innovative strategy” after the carrier posted lower earnings in its first results under his leadership.

Mr Smith, a Canadian who took charge last month, praised the company’s commercial strengths, attractive brands and staff - despite 15 days of strikes at the French arm this year. At the same time, he acknowledged that the business has fallen from the ranks of the industry elite.

Air France and KLM saw profit fall, though the Dutch arm’s 18 per cent margin remained well ahead of its larger sibling, a discrepancy that’s stoked tensions between both staff and management in Paris and Amsterdam.

The company posted third-quarter operating profit of €1.07 billion, 6.7 per cent lower than a year earlier. It provided no 12-month estimate.

It said full-year capacity increases will be cut to 2 per cent from the 2.5 per cent previously targeted.

The company also forecast passenger traffic and revenue would grow in the fourth-quarterm but said it saw a 2018 currency headwind of around €150 million.

Air France-KLM revealed that a recent pay deal with Air France unions will add €50 million to annual costs - rather less than the €335 million price of the walkouts. The talking isn’t done and Mr Smith must now tackle raises for pilots, who have threatened to resume strikes.

The 2019 fuel bill is expected jump by €900 million, almost double this year’s forecast gain, putting pressure on Mr Smith to secure labor peace without crippling the company. Rival Deutsche Lufthansa says next year’s increase in kerosene costs will be only €50 million higher.

Mr Smith, whose predecessor Jean-Marc Janaillac resigned after workers rejected his strategy, said deals reached so far will bring much needed stability. He has yet to provide detail on a range of high-profile questions, including the introduction of low-cost long-haul flights, the future of millennial-friendly Joon, the role of discount arm Transavia, and whether to refurbish Air France’s costly Airbus SE A380 fleet. – Bloomberg