Loss at Air France-KLM worse than expected

Air France-KLM has announced a heavier than expected loss last year because of high and still rising fuel costs, disruption to traffic from unrest in North Africa and an earthquake in Japan. The figures show the group is also struggling against competition from low-cost airlines. 

Guetty Images/ Pascal Le Segretain

The group revealed a net loss of 809 million euros for 2011 compared with net profit of 289 million euros on an equivalent basis in 2010. It also reported an operating loss of 353 million euros compared with a profit of 28 million euros.

Overall, the analysts had expected a net loss of about 650 million euros and an perating loss of 241.5 million euros.

The figures also showed that the group is suffering from competition from low-cost airlines. Air France is under particularly strong competition on medium-distance routes from low-cost airlines, and lost 700 million euros in this sector alone last year.

"The 2011 year was difficult for the group because of an uncertain economic environment and a large increase in the price of fuel," Air France-KLM head Jean-Cyril Spinetta said.

The airline warned that in view of the uncertain business climate and the rising cost of fuel, the operating outcome for the first half of this year would be worse than in the first half of last year.

But in the current first half the business should begin to benefit from the effects of a three-year plan to boost competitiveness.

The fuel bill, the second-biggest cost after staff pay, amounted to 6.438 billion euros last year, an increase of 904 million euros or 16.3 per cent from the figure for 2010. The company foresaw that this cost item would rise again this year by 1.1 billion euros.

The airline said that it had set an "absolute priority" of stabilising its net debt this year at 6.5 billion euros.

Spinetta told journalists, in a reference to the so-called Arab Spring, that unrest in North Africa, civil war in Africa and the earthquake and tsunami in Japan had "profoundly disorganised our network".

Under the three-year plan to 2015 announced in January, the airline intends to cut debt sharply to 2.0 billion euros by the end of 2014, to improve productivity and to return to balanced results for the medium-haul segment by the end of 2014.

Despite the overall figures, the board expressed confidence, saying that sales had risen by 4.5 per cent to 24.36 billion euros.

Spinetta also said that Air France-KLM was holding informal talks with Abu Dhabi airline Etihad on a possible commercial agreement but ruled out any possibility of Etihad acquiring an interest in the French group.