Air France-KLM faced larger-than-expected losses in the fourth quarter due to disruptions caused by the Israel-Hamas conflict and increasing expenses.
Financial Overview
- The company reported a net loss of 256 million euros ($277.5 million) for the three months ending in December, a significant drop from the profit of EUR496 million in the same period in 2022.
- An operating loss of EUR56 million was recorded, contrasting with a profit of EUR134 million in the previous year.
Market Impact
The disappointing results led to a 10% decline in Air France-KLM’s shares during early trading.
Impact of Geopolitical Issues
- The ongoing conflict between Israel and Hamas, ongoing since Oct. 7, negatively affected travel to the Middle East, including countries such as Egypt and Lebanon.
- Instability in Africa, marked by military coups, also contributed to disrupting operations for the carrier group.
Financial Challenges
- Geopolitical tensions in Africa and the Middle East resulted in an operating result reduction of EUR65 million.
- Additional costs from disruptions amounted to EUR70 million.
- A EUR30 million impact from the employee share plan added to the financial burden.
Cost Management
Air France-KLM struggled with inflation-related expenses, including increased salaries, air traffic control charges, and airport fees. Notably, costs rose by 3.5% in the fourth quarter. Despite this, the aircraft fuel expenses decreased by 5% to EUR1.95 billion, offering some relief amidst the financial challenges.
Air France-KLM Reports 4% Cost Increase in First Quarter
In the current quarter, Air France-KLM anticipates a 4% rise in costs compared to the previous year, attributed to disruptions in the initial two months of 2024 and a one-time payment to KLM staff. The company projects a 1% to 2% increase in costs for the full year of 2024.
International Performance Overview
- North Atlantic: Despite tensions in Africa and the Middle East, the company reported a solid performance.
- Latin America: Noted for strong demand.
- Asia: Led by exceptional growth in China, with positive performances in India and South-east Asia as well.
Financial Highlights
- Revenue: Showed a 3.9% increase, reaching EUR7.41 billion in the quarter.
- Passenger Volume: Handled 22.3 million passengers, a 6.4% growth from the previous year.
Market Expectations
Analysts from the company anticipate the following:
- Net Loss: Estimated at EUR82 million
- Operating Profit: Projected at EUR88 million
- Revenue: Predicted to be EUR7.45 billion
Future Outlook
- Capacity: Currently at 93% of 2019 levels, expecting a 5% increase in the upcoming year.
- Capital Expenditure: Set to range between EUR3 billion to EUR3.2 billion in 2024.
In conclusion, Chief Executive Benjamin Smith highlighted that enhancing performance would be a principal focus for Air France-KLM in 2024.
