Shares of Air France-KLM experienced a significant drop in Friday morning trading, despite the Franco-Dutch carrier group surpassing profit and revenue expectations for the second quarter. The company faced higher inflation-driven costs, which are predicted to continue rising throughout the year.
As of 0855 GMT, Air France-KLM shares were trading at EUR1.52, showing a 4% decrease.
In the second quarter, the group's cost increases were primarily due to higher salaries, as well as elevated air traffic control charges and airport fees. The company foresees a low single-digit increase in costs for the year.
"Higher inflation-driven costs continued to impact the results," noted analysts at Bernstein in a research note.
Nevertheless, the quarter witnessed a rise in passenger numbers, higher load factors, and strong yields. Air France-KLM reported revenue of 7.62 billion euros ($8.37 billion) for the three months ending in June, marking a 14% increase from the previous year. The company served 24.7 million passengers during the quarter—an increase of 8.2% compared to last year.
Net profit soared by 86% to EUR604 million, while operating profit surged by 90% to EUR733 million, resulting in a margin of 9.6%.
According to a company-provided consensus, Air France-KLM was expected to achieve revenue of EUR7.54 billion, with a net profit of EUR387 million and an operating profit of EUR665 million.
Airline Industry Resilient Amid Challenges
The global airline industry has encountered various challenges in recent times, but certain sectors have shown resilience. While the long-haul network of the group, serving the Americas, Africa, Asia, and the Middle East, thrived during the quarter, short-haul operations experienced setbacks due to air traffic control strikes in Europe.
In addition to labor shortages, airlines have also faced difficulties in supply chain logistics, making it harder to obtain spare parts and deploy aircraft efficiently.
Since last summer, the industry has grappled with a labor shortage stemming from an unexpected surge in passenger demand after the Covid-19 pandemic. This surge prompted operators to swiftly rebuild their networks.
The labor shortage resulted in months of travel chaos for passengers; however, the situation has improved gradually.
According to Chief Executive Benjamin Smith, there has been significant improvement in airport operations this summer, including at KLM's hub at Amsterdam Schiphol Airport. Smith emphasized that this summer season serves as a test run for 2024 when France will host the Olympic and Paralympic Games, with Air France acting as an official partner.
Despite the prevailing challenges, the group anticipates that available seat kilometers will reach approximately 95% of 2019 levels this year.
Our Latest News
QPR Software expects a decline in net sales due to consulting projects but remains optimistic about software business growth. Cost-saving measures and strategic...
Superdry reports a pretax loss for fiscal 2023 due to higher costs and impairments, while focusing on cost savings and improving margins. Shares were temporaril...
Schroders reports a decline in pretax profit for H1 2023 due to negative market performance, resulting in a decrease in assets under management. Revenue increas...