Newspaper article International Herald Tribune

Cost-Cutting Stems Loss at Air France ; Airline's Modest Results Prepare Way for Greater Savings, Chief Says

Newspaper article International Herald Tribune

Cost-Cutting Stems Loss at Air France ; Airline's Modest Results Prepare Way for Greater Savings, Chief Says

Article excerpt

But the airline's net loss widened on one-time restructuring measures.

An aggressive cost-cutting effort at Air France-KLM showed the first faint signs of bearing fruit Friday, as the airline said it had managed to trim its operating losses last year despite a weakening European economy and higher fuel prices.

Air France-KLM, Europe's third-largest airline by passengers, recorded an operating loss of EUR 300 million, or about $400 million, for 2012, compared with a EUR 353 million loss a year earlier, as efforts to rein in seat capacity led to higher average fares. Revenue for the year rose 5.2 percent to EUR 25.6 billion, while net debt declined to EUR 6 billion from EUR 6.5 billion in 2011.

But one-time expenses associated with a deep restructuring begun last year widened the airline's net loss to EUR 1.19 billion from EUR 809 million in 2011.

"They have made a good start, but it is an improvement that is still just barely visible," said Yan Derocles, an analyst at Oddo Securities in Paris.

Air France-KLM revealed plans last June to shave more than EUR 2 billion in costs, reduce debt and return to profit by the end of 2015. Despite the modest improvements achieved in the plan's first six months, Jean-Cyril Spinetta, the carrier's chief executive, stressed Friday in a statement that the company had laid the ground work for a more significant recovery this year.

"In 2013, we will maintain strict discipline in terms of capacity management, investments and costs," Mr. Spinetta said.

Air France-KLM said passenger traffic rose by 2.1 percent last year, while seat capacity increased by just 0.6 percent. But while revenues per available seat rose by 5.9 percent from a year earlier, cargo revenues continued to slide, falling by 6.3 percent despite a 3.5 percent drop in capacity, as the economic slowdown reduced shipments. …

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