By Elviira Luoma
(Reuters) -Air France-KLM on Thursday reported a bigger-than-expected drop in its quarterly operating result and warned that this year’s costs would be higher than previously projected.
The French-Dutch airline group’s shares fell 11% and could see their biggest daily drop in over two years if the losses persist.
It expects its unit cost – the average cost of flying an aircraft seat one mile – to grow by around 3% in 2024, instead of the previously forecast 2%, after it rose 3.4% in the third quarter and with worsened expectations for the fourth.
“This is mainly related to higher staff and maintenance cost at KLM and lower capacity planned,” Bernstein analysts said in a note.
The group’s Dutch arm in October said it would cut costs and postpone investments to lift profits, as the industry faces rising equipment costs, staff shortages and higher airport fees.
“At KLM, persistent cost challenges spiked higher than anticipated, putting pressure on parts of its business model and reinforcing the need for more concrete structural improvements,” group CEO Benjamin Smith said in a statement.
Amsterdam’s Schiphol airport will increase its fees for airlines by 41% from April 2025, which KLM estimated would lead to an operating profit impact of 65-110 million euros next year.
Air France-KLM also said that France’s proposed hike of the solidarity tax on flight tickets could hit its operating result by 90-170 million euros in 2025.
“Direct consequence could be higher fares which could make air travel less accessible to customers in our own market,” Smith said at a press conference.
He added that it may be difficult to pass on these costs to customers, and the airline might therefore need to absorb a portion of them, further impacting its competitiveness and profitability.
The group’s operating profit fell by 162 million euros to 1.18 billion euros ($1.27 billion) in the third quarter, missing a consensus of 1.24 billion euros.
The result was hit by higher unit costs and the Paris Olympics which caused international tourists to avoid the city and residents in France to postpone their holidays.
Quarterly revenue still rose by 3.7% to 8.98 billion euros, driven by increased capacity and strong underlying demand.
($1 = 0.9315 euros)
(Reporting by Elviira Luoma in Gdansk; Editing by Sandra Maler and Milla Nissi)
