Europe’s biggest airline, Air France-KLM, has reported a 96% drop in second quarter profits to €28m (£23.6m) as high fuel prices and slackening demand took their toll.
Earnings before interest and tax were €405 million, 44% down from €725 million a year earlier. Operating income fell 44% to €639 million from €1.14 billion.First-half sales rose 4.4% to €13bn, with operating earnings at €639m despite a 35% rise in fuel prices during the period. Net income fell to €28 million.
Activity in the second quarter was dented by weak economic growth, a rise in the oil price and a weak U.S. dollar. However passenger numbers held firm, with traffic up 1.7% and capacity up 3.6%. The load factor was down 1.6% to 83%.
Chief Operating Officer Pierre-Henri Gourgeon, who becomes chief executive in January, said, “It was a good half in a difficult context. We resisted better than the competition because we have a powerful system with two hubs.”
He also added that the airline’s operating margin was also superior to competitors Lufthansa and British Airways.
The carrier has restricted capacity increases this winter and next summer to 1-2 percent due to a drop in demand. It has been raising the number of seats by about 5% per anum.
The group’s financial position remains healthy, with €4.4 billion in cash and available credit lines of €2 billion, of which the airline drew down €500 million at the beginning of October.
According to reports in the Italian media, Air France-KLM is favourite to edge out Lufthansa to acquire a stake in Alitalia as it has the backing of the take-over consortium CAI. However the announcement was delayed this week after Prime Minister Silvio Berlusconi announced both he and German Chancellor Angela Merkel were in favour of a potential alliance between Alitalia and Lufthansa.