Air France-KLM Fourth Quarter Losses

by webmaster

Air France-KLM faced larger-than-expected losses in the fourth quarter due to disruptions caused by the Israel-Hamas conflict and increasing expenses.

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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.

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