Air France-KLM losses widen but signs of recovery appear

Although the French airline group is still suffering from the downturn and terror attacks at home, its pricing has improved alongside revenues in the first quarter.

An Air France Airbus A319 passenger jet makes its way on the tarmac at Orly airport, near Paris. Although losses have grown, revenues are up and a rebound seems to be taking shape for Air France-KLM. Charles Platiau / Reuters
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The operator of the French and Dutch airline group Air France-KLM said a resilient start to the year had continued, with demand recovering from Asia and south America as it reported first-quarter results in line with expectations on Thursday.

Its first-quarter loss was €216 million (Dh866m), wider than last year’s loss of €155m.

Ebitdar (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs), however, increased to €554 from €531m a year ago.

Revenues increased 1.9 per cent to €5.71 billion from €5.61bn last year. The company recorded solid traffic performance with passengers carried up 5.2 per cent at 20.9 million.

After years of falling ticket prices, some major European carriers are seeing fare declines slow down and have made more upbeat comments on pricing for 2017, against a backdrop of increased travel demand and rising oil prices.

Air France-KLM, one of the first carriers to report an improvement in pricing earlier this year, said unit revenues fell 0.5 per cent in the first quarter, compared with a drop of 5 per cent for 2016 as a whole.

Lufthansa last week said it was seeing a rebound in travel demand from north America and Asia, although it stuck to its expectations for a slight drop in profits this year.

The Air France-KLM chief financial officer Frederic Gagey said forward booking data for long-haul routes for the crucial summer months showed that the carrier had sold more seats than at the same point last year.

“We’re not saying that everything is going well, but the trends that we saw have been confirmed or even improved compared with what we said earlier in the year,” he said.

The group confirmed financial targets for 2017 and added that risks remained from an uncertain geopolitical backdrop and a fluctuating fuel price.

Echoing comments made by Lufthansa, Mr Gagey said the group’s air freight business had also seen a pick-up at the start of 2017, with load factors improving.

The company also stuck to a target for a reduction of unit costs of at least 1.5 per cent this year. Unit costs fell by 1.7 percent in the first quarter at constant exchange rates.

Among cost-cutting efforts, the group’s Air France division is seeking to set up a new airline this autumn to operate 10 long-haul and 18 short-haul aircraft at lower costs than its main brand, under a project dubbed “Boost”.

The company said it is in no hurry to take a decision on renewing its fleet of single aisle planes, but expects to start talks in 2019, Mr Gagey said on Thursday.

“We have to think about options in long-term for the renewal of short-haul fleet. We plan to open discussions with the planemakers by the middle or end of 2019,” he said.

Mr Gagaey added he was waiting for the manufacturers to come out with some news on their plans for the future of single-aisle aircraft.

Both Airbus and Boeing and have refreshed their popular A320 and 737 short-haul planes with new variants in recent years.

* Agencies

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