Air France-KLM Cuts First-Quarter Loss as Cargo Demand Drops

Apr 30, 2014 3:10 am ET

(Updates with stock performance in fifth paragraph.)

April 30 (Bloomberg) -- Air France-KLM Group narrowed its first-quarter loss as the fuel bill dropped and reiterated full- year earnings targets as a turnaround plan takes hold.

The operating loss decreased to 445 million euros ($614 million) from 532 million euros a year earlier, while sales dropped 2.2 percent to 5.55 billion, in part because the busy Easter travel period fell outside the quarter, according to a statement from the Paris-based airline. Air France still aims to achieve earnings before interest, tax, depreciation and amortization in the region of 2.5 billion euros in 2014.

“Delivery on the Transform 2015 plan is fully on track,” Air France-KLM said in the statement. “However, the general operating environment remains tough.”

The carrier has cut more than 7,500 jobs in three years as part of an overhaul aimed at making it more competitive with rival airlines such as Deutsche Lufthansa AG, British Airways and Gulf-region carriers such as Emirates. Chief Executive Officer Alexandre de Juniac said today that the cargo business is recovering more slowly than anticipated, and that the company may need to “restructure the full freighter business.”

Air France fell as much as 39 cents, or 3.5 percent, to 10.75 euros in Paris, and traded at 10.9 euros as of 9:08 a.m. The stock has advanced 44 percent this year, the best performer on the 30-member Bloomberg World Airlines Index in the period.

The airline’s fuel expenses dropped 2.8 percent to 3.74 billion euros in the quarter. Kerosene costs typically represent 40 percent of expenses on many routes. Air France has said the two areas that most urgently require change are in short-and- medium-haul operations and in cargo. Cargo revenue dropped 3.4 percent to 676 million euros.

Net debt stood at 5.54 billion euros as of March 31, compared with 5.35 billion euros at the end of 2013.

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