Air France-KLM Group, Europe's biggest airline, reported a full-year loss as a sluggish economy and high fuel costs crimped earnings and said results for the current six months will show a further deterioration.
The Paris-based company reported a net loss of €809 million compared with a €289 million profit in 2010, it said in a statement. Analysts had predicted a loss of €669 million.
Air France-KLM will lift capacity no more than 2 per cent in each of the next three years, with fleet spending also reined in.
Jean-Cyril Spinetta, recalled as chief executive officer in 2011 as a profit slump forced the exit of Pierre-Henri Gourgeon, also froze pay and hiring in January and began productivity talks with unions aimed at delivering an overall €2 billion annual saving he says is needed to secure the long-term future.
"2011 was a tough year due to the uncertain operating environment and high fuel price," Mr Spinetta said in the statement. "In this context the success of the transformation plan is all the more crucial.The announced measures are already underway."
Union talks will last until the end of this month, and the company aims to have an agreement in place by the end of June delivering a 20 per cent efficiency improvement at Air France by 2014 and stable payroll costs at KLM, the chief executive said.
"This goes in the right direction," said Yan Derocles, an Oddo Securities analyst in Paris with a "buy" rating on the shares. "But I don't think it will be sufficient given the current fuel price increase."
Air France-KLM shares fell as much as 2.9 per cent and traded 2.7 per cent lower at €4.07 in Paris today. While the shares have gained 2.6 per cent in 2012, valuing the company at €1.22 billion, they are down 65 per cent for the past 12 months. That's more than twice the decline at rivals Deutsche Lufthansa AG and IAG and the worst performance in the seven-member Bloomberg EMEA Airlines Index, which is 25 per cent lower.
Even as revenue at the carrier, which switched to calendar- year reporting, increased 4.5 percent to €24.4 billion and traffic gained 6.6 per cent, unit revenues at the passenger business slid 1.2 per cent, suggesting a slide in ticket prices.
For the current year the economic outlook is uncertain and fuel prices remain at record levels, with the bill likely to increase by €1.1 billion, it said, leading to a first-half operating result "well below that of the previous year."
Bloomberg