Paris: Air France-KLM posted a sharp increase in core profit for the second quarter and announced a new 2015-2020 plan on Friday to recapture market share from low-cost rivals in Europe, helping push its shares up more than 5 per cent.
Europe’s second-largest traditional carrier by revenue joined its bigger rival Lufthansa in trying to win back business from low-cost champions such as easyJet/sand said it was prepared to use acquisitions to achieve its aim.
Air France-KLM has been reducing costs and debt as part of its “Transform 2015” plan, which is due to end in a few months.
The new plan, “Perform 2020”, will focus on maintaining its position in long-haul markets while trying to achieve growth in short-haul markets. Details will be announced in September.
“The consolidation of the low-cost sector is under way and we want to take part,” Chief Executive Alexandre de Juniac said.
“The idea is to be in the leading group of European low-cost carriers, given that aviation is a business where size is important,” he told reporters.
The company also plans acquisitions in maintenance and overhaul where it wants to offer services to external clients.
Air France-KLM shares, which had fallen earlier this month to a five-month low of €8.20 (Dh40.5), were up 5 per cent at €9.04 by 0730 GMT. Lufthansa rose 1 per cent in a slightly weaker market.
Formed from a merger of French and Dutch carriers in 2004, Air France-KLM has been relatively cautious about further consolidation and recently allowed its shareholding in Italy’s Alitalia to be diluted in the absence of guarantees on its debt.
De Juniac seemed relaxed about subsequent plans for a tie-up between Alitalia and Abu Dhabi’s Etihad, with which Air France also has a codeshare deal, and said he hoped to strengthen business ties with its Skyteam partner in Italy.
The plan to counter the low-cost boom in Europe comes weeks after Lufthansa’s new chief executive announced plans to expand its low-cost services under new brands, though some analysts have questioned the move. Air France-KLM reported €641 million ($862.2 million) in earnings before interest, tax, depreciation and amortisation (EBITDA) in the second quarter, up from €510 million in the same quarter of last year.
Its gross operating margin rose to 9.9 per cent from 7.8 per cent on sales which rose 1.7 per cent on a like for like basis to €6.451 billion.
It reaffirmed its latest profit and debt goals for 2014 in the wake of a profit warning earlier this month, but said it remained in a tough environment due in part to overcapacity on some long-haul routes, notably North America and Asia.
Passenger profits more than doubled to €255 million due to tight controls on capacity and a 4.4 per cent drop in unit costs. But the cargo business remained in the red due to a slower than expected economic recovery.
Air France-KLM took a €106 million charge on its loss-making cargo planes and said it was also looking at a partnership or restructuring of its full-freighter business.
