Europe's largest airline Air France-KLM posted a 44 per cent drop in operating profit in the second quarter and cut its full-year forecast while boosting cost savings to prepare for hard economic times.
Its stock fell almost 10 per cent as an airline which had been seen as relatively sheltered from the economic crisis compared to its rivals, due to the broad reach of its network, also scaled back its expansion plans.
The Franco-Dutch airline group said today quarterly operating profit fell to €405 million ($511.3 million), slightly beating analyst expectations, on revenues which fell 3.2 per cent to €6.695 billion.
Air France-KLM said its net profit for the July-Sept. quarter plunged 96 per cent to €28 million after a charge based on the potential value of currency and fuel options.
Adjusted net income, which Finance Director Philippe Calavia called a more reliable gauge of profitability and comparable to analyst estimates, fell 5.6 per cent to €411 million.
Analysts had on average expected quarterly operating profit of €379 million on sales of €6.619 billion, and net profit of €258 million, according to Reuters Estimates.
At 9.04am Air France-KLM shares were down 7.4 per cent, lagging a market down 2.8 per cent on growing fears of deflation.
Air France-KLM reiterated its interest in buying a minority stake in Alitalia but gave no indication it was closer to a deal after months of waiting. It is competing with Lufthansa for a stake in the carrier which Italy agreed this week to sell to a rescue consortium that now seeks a partner.
Italian Prime Minister Silvio Berlusconi backs Lufthansa.
"We have heard nothing and the decisions will come out of Italy. But people were writing us off a short while ago," deputy Chief Executive Pierre-Henri Gourgeon told Reuters. "We are waiting with serenity."
Air France-KLM, which last month warned it would be unable to meet its full-year operating profit goal of €1 billion, removed the numerical target and said it expected its results to be "clearly positive" in 2008/09 barring worsening conditions.
Analysts on average expect a full-year operating profit of €805 million.
Reuters