Air France -KLM reports first quarterly loss since 2003 – annual profits will also fall
22 May 2008
Air France-KLM Group, Europe's largest airline, said it had posted its first quarterly loss since 2003 and also said earnings for the year are likely to plummet almost 30 per cent on the back of rising fuel prices and an economic slowdown.
Air France announced a net loss of 542 million euros ($856 million) in the fourth quarter ended 31 March, taking a hit from a charge against a price-fixing probe. Profit for the same period in the previous year was 44 million euros.
It said sales were up 5.8 per cent to 5.7 billion euros.
``The change in the economic context and a doubling of fuel prices will make the current year challenging,'' chief financial officer, Philippe Calavia, said. He said the company has scrapped its goal of achieving an 8.5 per cent return on capital by fiscal 2010.
Fuel costs for the airline would jump by about 1.2 billion euros for the year after the price of crude oil breached $135 a barrel, Calavia said at a briefing. The airline estimates that operating profit will decline to 1 billion euros, from 1.4 billion euros, in fiscal 2008.
Air France fell as much as 2.09 euros, or 11 per cent, to 16.56 euros, its sharpest drop since Sept. 30, 2002. The stock has declined 30 per cent this year.
Air France-KLM has hedged about 78 per cent of its fuel requirements for the current year at between $70 and $80 a barrel, Calavia said.
The French carrier also said it was comfortable with a decision last month to abandon takeover talks with Italian state-owned airline Alitalia SpA after failing to agree terms with unions. ``Alitalia is in a much more difficult position now than it was two months ago,'' Calavia said today.
He also predicted that the high oil price and slowing economy may drive some airlines out of business.
