Air France Says Recovery in Business Travel, Freight Drove Earnings Boost
Air France-KLM Group, Europe’s biggest airline, said resurgent business travel and freight traffic helped it return to operating profit in the fiscal first quarter, excluding the effect of a volcanic eruption in Iceland.
Operating profit in the three months ended June 30 was 26 million euros ($34 million) before the 158 million-euro cost of the eruption, versus a 496 million-euro year earlier loss, the company said. Sales rose 11 percent to 5.72 billion euros.
Air France said a recovery in demand accelerated in the period, with bookings also strong for the current quarter. The Paris-based carrier cited its fuel bill and concern over the economy for setting a “prudent” full-year goal of breaking even at operating level, excluding costs from the volcano.
“I think their guidance is too pessimistic,” said Yan Derocles, an analyst at Oddo Securities in Paris who predicts a 90 million-euro operating profit before the ash cloud’s impact, driven by “strong” growth in sales and ticket prices. “Forward bookings also seem pretty well oriented from now to October, the major part of the season for cash generation,” he said.
Air France-KLM closed down 0.1 percent at 10.96 euros in Paris yesterday before the results were released and is little changed this year, giving a market value of 3.29 billion euros. Shares trading in the U.S. gained as much as 5.6 percent and were up 1.7 percent as of 1:46 p.m. in New York.
Amadeus Gain
Air France-KLM posted quarterly net income of 736 million euros, positive for the first time in almost two years, after a 1.03 billion-euro gain from its stake in the Amadeus IT Holding SA flight-booking system. Analysts had predicted a figure of 403 million euros, the average of 11 estimates compiled by Bloomberg, following a year-earlier loss of 426 million euros.
Operating losses at the passenger business narrowed to 142 million euros from 338 million euros on an 8.8 percent gain in revenue, and the division would have had a 3 million-euro profit without the Eyjafjallajökull volcano’s April 14 eruption, which grounded thousands of Air France flights, the company said.
The cargo unit, less affected by the disruption, posted operating income of 11 million euros, compared with a year- earlier loss of 197 million euros, as sales surged 42 percent.
While air traffic has rebounded since the economic crisis, advancing 12 percent globally in May to climb above pre- recession levels, the recovery is slowest in Europe, the International Air Transport Association said on June 29.
Air France-KLM is the first of Europe’s major airlines to report earnings this quarter. Deutsche Lufthansa AG, the region’s No. 2, is scheduled to announce results tomorrow, followed by British Airways Plc on July 30.
European airlines suffered the most from a loss of revenue after the Icelandic eruption, which closed most of the region’s airspace for six days in April, halting 100,000 flights.
Madrid-based Amadeus raised 1.32 billion euros in April in western Europe’s biggest initial public offering since 2008. Air France and Lufthansa lowered their stakes as part of the transaction, which also resulted in a one-time gain for the French carrier as it wrote up the value of its holding.
To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net
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