Air France-KLM to cut costs despite profit rise

Operating profit overall up 35% but down 54% at Air France
Air France-KLM reports a 35% rise in full-year profits to more than a billion euros – but still pledges to continue its cost cutting while boosting passenger capacity this year.
Operating profit leaped up to €1.05 billion in 2016, helped by lower fuel costs and speedy cut costs at KLM. But at Air France itself, profit fell 54% to €372 million.
The carrier warned of growing uncertainty in 2017, pointing to a sluggish economy, political risk over forthcoming French and German elections and overcapacity in several core markets.
But unit revenues are better than expected so far in 2017, encouraging the airline to lift capacity by as much as 3.5% this year in long-haul, while lowering unit costs by a further 1.5%.
“In an economic and geopolitical context that remains very uncertain, and faced with aggressive competition, the status quo is not an option,” said Jean-Marc Janaillac, chief executive since last year. He added that he was “resolutely committed to regaining the offensive”.
Janaillac has already said he aims to launch a new unit, Boost, to operate lower-cost flights in long and short haul in way that will not anger unions. If the company failed to become more competitive, he told the FT, it would “end up like Alitalia”.


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