The growing expenses of Air France-KLM overshadow the profit surge

Air France-KLM, the Franco-Dutch airline, has revised its forecast for costs this year due to inflationary pressures, taking the shine off higher-than-expected quarterly earnings on Friday. Although fuel prices have fallen, the carrier said overall unit costs would increase by a low single-digit percentage in 2023 versus 2022 due to factors including higher salaries and a previously downgraded capacity estimate¹. Its previous guidance had been for flat costs this year.


Air France-KLM expects to reduce its unit cost by improving productivity but does not plan to cut full-time equivalent positions as it needs more staff. The company flew 24.7 million passengers in the second quarter, up 8.2% from a year earlier. It said conditions at airports, including KLM's hub at Amsterdam Schiphol Airport, were much improved this summer after strikes and staff shortages last year - the first holiday season without restrictions following the COVID-19 pandemic.

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This summer season will serve as a test run for 2024 when France will host the Olympic and Paralympic Games, Chief Executive Benjamin Smith said in a statement. Air-France KLM's operating profit jumped to 733 million euros in April-June from 386 million a year earlier, above the 663 million euros forecast in a company-compiled consensus. The group confirmed its capacity outlook for the rest of the year, reduced in May to around 95% of the 2019 level - from 95-100% previously - due to delays on new aircraft deliveries.

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The carrier, which like IAG and Lufthansa has shown an interest in Portugal's state-owned airline TAP, has hired legal advisers for a possible bid but said any transaction would depend on keeping its commitment to a medium-term operating margin of 7-8%.

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