Air France-KLM Group SA, Europe's largest airline, posted a fourth-quarter loss and said earnings this year will drop almost 30 per cent as fuel prices soar and an economic slowdown dents demand for travel.
Air France fell the most in 5 1/2 years in Paris trading after it had a net loss of €542 million ($856 million) in the three months through March, hurt by a charge against a price-fixing probe. Year-earlier profit was €44 million.
Sales rose 5.8 per cent to €5.7 billion, the company said. Fuel costs will jump by about €1.2 billion this year after the price of crude oil breached $135 a barrel, chief financial officer Philippe Calavia said at a briefing.
The airline estimates that operating profit will decline to €1 billion from €1.4 billion in fiscal 2008.
"The change in the economic context and a doubling of fuel prices will make the current year challenging," Mr Calavia said. He said the company has abandoned its goal of achieving an 8.5 per cent return on capital by fiscal 2010.
Air France fell as much as €1.80, or 9.7 per cent, to €16.85, its sharpest drop since September 30th, 2002. The stock was trading at €17 as of 9.15am, taking declines this year to 29 per cent and valuing the company at €5.1 billion.
Deutsche Lufthansa, Europe's second-biggest carrier, is down 14 per cent and British Airways has slumped 37 per cent.
Crude oil rose above $130 a barrel for the first time yesterday after at least five banks increased their price forecasts, citing supply constraints amid burgeoning demand.
Air France-KLM has hedged about 78 per cent of its fuel requirements for the current year at between $70 and $80 a barrel, Mr Calavia said. The Air France and KLM operating units increased fuel surcharges 12 times last fiscal year in an effort to pass escalating costs to customers.
Bloomberg