Air France KLM Experiences 59 percent Profit Drop

On Tuesday of last week, Air France KLM reported a profit decrease of 50% for their fiscal 1st quarter, since their fuel surcharges weren’t enough to counter the soaring cost of their fuel bill. The airline was the last major carrier in Europe to report their earnings, saying that their profit dropped from 415 million euros to 168 euros. The company’s revenue increased 6% at 6.29 billion euros following a rise in their passenger traffic of 3.7%. On average, analysts were looking for Air France KLM to report a 145 million euro profit on a 6.27 billion euro revenue. The shares of the carrier increased more than 8%, joining a rally among the carrier sector as crude oil fell to less than 120 dollars per barrel.

Although Air France KLM managed to offset some price rises on their energy bill by charging extra fees on fares, the price of jet fuel took a chunk from their earnings by 1.36 billion euros, which is more than last year by 266 million euros. Unit costs aside from the cost of fuel rose as well, according to the airline, with a rise of 0.9% when currencies and fuel are excluded.

The earnings report from the airline comes only a week following Iberia and British Airways taking a page from their playbook by announcing that the 2 airlines were having talks for a merge. Air France KLM maintains operations under the names of KLM and Air France, the same that Iberia and British Airways are planning. If BA-Iberia are combined, then Air France KLM could be put under pressure since they are 2nd in Latin America and Europe behind Iberia for providing flights between the 2 locations. When KLM and Air France combined, they saved 114 million euros in the quarter, according to the airline. Their Challenge 10 program is going to generate another savings of 190 million euros for the fiscal year, bringing their total of savings at 620 million euros.

Find out more at: www.airfrance.com -or- www.klm.com