Amsterdam: Air France-KLM Group said third-quarter earnings slumped 16 per cent as terrorist attacks in Paris and other French cities depressed tourist demand and overcapacity across European markets weighed on air fares.
Operating profit fell to 737 million euros ($818 million) from 880 million euros a year earlier, the region’s biggest airline said in a statement Thursday. Analysts had predicted a figure of 735 million euros.
Conditions remain tough amid geopolitical and economic uncertainty, concern about France as a destination and pressure on unit revenues, a key pricing measure, the company said. Chief Executive Officer Jean-Marc Janaillac, who took over on July 4, will lay out his plans for cutting costs and halting the loss of passengers to discount and Arabian Gulf rivals.
Air France-KLM provided no specific guidance for full-year earnings, reiterating only that the drop in unit revenue, combined with a negative currency impact, will more than outweigh fuel savings. Free cash flow will be between 600 million euros and 800 million euros, it said, having previously suggested a range of 600 million euros to 1 billion euros.
Industry-wide capacity grew as much as 8 per cent this summer, with no improvement in the commercial environment, Chief Financial Officer Pierre-Francois Riolacci said in a media briefing.
“There’s lots of uncertainty surrounding the economic rebound, and the geopolitical situation has been worrying, especially with the consequences of terrorist attacks on European destinations, particularly France,” Riolacci said, while adding that the company is content with analyst forecasts suggesting it will remain comfortably profitable for the year.
Riolacci will be replaced as group CFO by Air France unit chief Frederic Gagey when he stands down later this year, with Gagey in turn succeeded by Franck Terner, who was previously executive vice president for engineering and maintenance at the parent company.
Janaillac also becomes chairman of Air France, as well as holding down the same role at Air France-KLM. The former bus company boss became CEO after predecessor Alexandre de Juniac quit after three years in the job following a series of high-profile clashes with unions.
