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Air France sinks to another US$1bn loss

Air France-KLM has fallen to a second consecutive billion-dollar net loss, as restructuring costs and a weak operating environment hit the carrier in 2012.

Air France-KLM is Europe's second-largest airline group
Air France-KLM is Europe's second-largest airline group

Europe’s second biggest airline group posted a net loss of EUR1.19 billion (US$1.57bn) last year, following a US$1.07bn full-year net loss in 2011. The company’s revenues did improve compared to last year however, rising 5.2% to EUR25.63bn, while its operating loss narrowed slightly, from EUR353m in 2011 to EUR300 in 2012. But the airline also incurred EUR471m of restructuring charges, which compounded the heavy net loss.

Jean-Cyril Spinetta, Chairman of Air France-KLM, lamented the “very tough” operating environment and said the result was “in line with our expectations”. He added however, that the airline was making progress towards its recovery.

“It was a year in which our fundamentals were restored, as the first, necessary step towards the recovery of our group. Our working practices have been overhauled, industrial projects have been determined for each of our businesses while reducing costs and improving our financial position,” Spinetta said.

“In 2013 we will maintain strict discipline in terms of capacity management, investments and costs. 2013 will also see the full implementation of all our projects. It is therefore a crucial year for the success of the Transform plan, and the return to sustainable profitability,” he added.

Operationally, Air France-KLM increased its passenger traffic (measured in revenue passenger kilometres) 2.1% in 2012 – greater than its 0.6% expansion of seat capacity. This allowed the airline to increase its average cabin load factor to a healthy 83.1%. The company’s operating expenses also increased however, with fuel costs jumping 13.8% to EUR7.34m and salaries rising 2.7% to EUR7.66m.

Despite the rise in seat capacity, Air France-KLM actually reduced its operational fleet size by 13 aircraft in 2012, to 374 aircraft.

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