• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Air France-KLM 4Q Profit Falls 30 Percent

Posted on: Thursday, 18 May 2006, 09:10 CDT

PARIS - Air France-KLM, the world's largest airline by sales, posted a 30 percent drop in net profit for its fiscal fourth quarter Thursday but said underlying earnings were stable despite soaring oil prices.

Net profit fell to 7 million euros ($9.02 million) in January through March from 10 million euros a year earlier, the airline said, despite a 13 percent increase in revenue to 5.20 billion euros ($6.7 billion).

The rising fuel bill resulted in a 12 percent increase in overall operating costs, Air France-KLM said.

Net profit for the fiscal year ending March 31 almost halved to 913 million euros ($1.18 billion) from 1.70 billion euros the previous year, as revenue rose 10 percent to 21.45 billion euros ($27.63 billion).

Air France-KLM said the year-ago net figure was inflated by a one-time pension fund surplus of 928 million euros ($1.19 billion). Excluding the pension surplus, net profit rose 29 percent, the company said.

Full-year operating profit rose 69 percent to 936 million euros ($1.21 billion), lifting the company's operating margin - or operating profit as a share of revenue - to 4.4 percent from 2.8 percent a year earlier.

"This capacity to maintain solid results in an environment characterized by rocketing oil prices gives me great confidence in our ability to improve our profitability over the medium term," Air France-KLM Chairman Jean-Cyril Spinetta said.

Cost-cutting and synergies from the 2004 merger of Air France and KLM Royal Dutch Airline helped offset rising fuel prices and boost the operating margin, the airline said, and fuel surcharges on ticket prices should generate about 200 million euros ($258 million) of additional revenue in the current fiscal year.

Air France-KLM said it achieved better-than-expected net profit last year thanks to "extremely dynamic levels of activity in our sector." It also boasted Europe's "strongest growth in traffic and load factors." Load factor is a measure of the share of available seats that an airline fills with passengers.

Passenger traffic rose 8.6 percent last year while capacity rose 6.2 percent, resulting in a load factor of 80.6 - five points above the European industry average, the airline said.

Chief Operating Officer Pierre-Henri Gourgeon said the company would achieve additional synergies of 115 million euros ($148 million) this year and cut a further 325 million euros ($418.66 million) in costs. Some 70 million euros ($90.17 million) of savings will come from replacing older airplanes with newer, more fuel-efficient jets, he said.

Air France-KLM forecast operating profit this year of "at least the same level as last year."

Fuel hedging helped contain the company's fuel bill at 3.59 billion euros ($4.62 billion) last year, up 32 percent from the previous year.

This year, Air France-KLM is forecasting a 22 percent increase in the fuel bill to 4.4 billion euros ($5.67 billion).

Air France-KLM shares fell 0.8 percent to 17.11 euros ($22.04) in Paris.

Source: Associated Press/AP Online

More News in this Category