Air France-KLM heads for 2011 loss, cost cuts

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Air France-KLM pledged cost cuts and a shake-up of operations as economic woes and lower-than-expected quarterly profits triggered predictions of a calendar-year operating loss.

Europe’s largest airline by revenues, which is in the midst of changing its financial timetable to the ordinary calendar year from April/March, also said it would cut debt “rapidly”.

Chairman Jean-Cyril Spinetta, returning as an interim chief executive after a management shake-up last month, said the airline needed to do more to cut costs because of its “insufficient profitability in recent quarters”.

The Franco-Dutch group reported an operating profit of 397 million euros and a net profit of 14 million between July and September. Analysts polled by Reuters had predicted operating profits of 480 million euros and a net profit of 283 million, Reuters reports.

The airline said it would make an operating loss for Jan.-Dec 2011, even though April-Dec. would be profitable.

Spinetta said its new management, with former defence executive and finance ministry official Alexandre de Juniac due to take up a post running the Air France network later this month, would have three priorities.

These would include another batch of cost savings to restore competitiveness, a restructuring of short- and medium-haul operations and a “rapid reduction” of debt.
“An action plan for these priorities will be presented during the first quarter of 2012,” he said.

Net debt stood at 6.5 billion euros at Sept. 30.

Cabin crew staged a five-day strike on the Air France part of the Franco-Dutch group last weekend, hitting one in five flights.

Air France and KLM merged in 2004 but kept separate networks.

Air France-KLM said quarterly revenues rose 2.1 percent to 6.79 billion euros, close to analyst forecasts of 6.99 billion.

Air France-KLM shares have fallen faster than those of their rivals this year as it wrestles with high staff costs, a large debt pile and competition from low-cost carriers.



Its shares closed at 4.87 euros, down 2.8 percent on Wednesday.