By Stephanie Hamel
(Reuters) -Airline group Air France-KLM reported a worse-than-expected 30% drop in quarterly operating profit on Thursday, as higher labour and fuel costs erode margins even as revenues are boosted by higher fares.
Second-quarter operating profit fell to 513 million euros ($557 million), below the 547 million euros expected in a company-provided consensus of analyst forecasts.
“The miss … is driven by 3% higher fuel costs & 2% higher D&A” (depreciation and amortization)” said a Deutsche Bank note.
Air France KLM shares were up 1.8% at 0848 GMT, after opening slightly lower.
Several airlines, including Ryanair, have missed earnings forecasts recently amid rising costs and signs the post-pandemic boom in travel is fading, although easyJet painted a brighter picture on Wednesday.
Air France-KLM said higher costs came from salaries linked to labour agreements at both its Air France and KLM businesses, and higher tariffs at Amsterdam Schiphol and Paris airports.
The group said it expected unit costs – the average cost of flying an aircraft seat one mile – to rise 2% in 2024 from the year before, against 1-2% estimated previously.
It trimmed its annual capacity forecast to a 4% rise, from 5% previously.
Air France-KLM said it had taken measures to cut costs since April, including a hiring freeze for support staff.
Cuts in marketing expenses and a 20% reduction of discretionary costs should be implemented in the rest of this year, it said.
Quarterly revenue rose 4.3% to 7.95 billion euros, as expected, though the company noted a 40 million euro hit from the Olympic Games in Paris, which opens on Friday. The group issued a profit warning earlier this month as the Games spurred some people to rethink their travel plans.
“The magnitude of the Olympics hit is surprising but it had been flagged. We see a 5% cost-driven miss on EBIT (operating profit) and materially higher net debt, so little to encourage,” noted Deutsche Bank.
($1 = 0.9217 euros)
(Reporting by Stéphanie Hamel; Editing by Bernadette Baum and Mark Potter)
