Air France-KLM losses deepen under higher fuel costs, competition

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Air France-KLM said Friday its losses deepened in the first quarter of the year under the pressure of higher fuel costs and competition, although the group managed to boost passenger numbers.

The net loss of 320 million euros ($357 million) was worse than the 269-million-euro loss it suffered in the January-March period last year.

The Dutch-French airline group’s shares fell more than four percent at the opening of trading in Paris while the overall market was flat.

The airline group managed to trim costs but said in a statement that “unit cost improvement was more than offset by unit revenue, fuel bill and currency headwinds.”

A key measure of performance, passenger unit revenue per available seat kilometre, slid 1.9 percent.

“As anticipated, the first quarter has been challenging for the European airline industry including the Air France-KLM Group, as substantial industry capacity growth in the off-peak business period led to unit revenue pressure,” chief executive Benjamin Smith was quoted as saying in the statement.

The airline’s long-haul routes performed better than short and medium-haul routes where there is more competition from budget airlines.

The group’s own budget airline, Transavia, expanded capacity by over 11% and filled more seats but with the Easter holiday falling in April this year, unit revenues declined.

Smith noted the group is “reaping the benefits of its efforts to strengthen its positioning, as evidenced by the first signs of progress in operational performance at Air France,” in particular better punctuality and a higher percentage of passengers giving positive recommendations.

“These elements, together with a more benign industry supply outlook for the summer, lead us to expect improving trends in the rest of the year and to confirm our full-year guidance.”

The group aims to trim or hold costs in 2019 and reduce debt. Last year, net profits rose by 150% to 409 million euros.

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