Air France profits fail to take off

Airline stocks recover from initial plunge as rising fuel bills and global unrest take toll

European airline Air France-KLM has reported disappointing earnings for the third quarter of 2019, blaming the public’s reluctance to travel and rising fuel costs. The company’s stock dropped €0.80 or 11.9 per cent on the news but recovered, trading down about 0.51 per cent in early afternoon trading.

CFO Frederic Gagey referred to continuing unrest in Brazil, Argentina, Hong Kong and Lebanon, saying: “People’s inclination to travel is not at its peak.” Air France’s 2019 fuel bill is expected to reach €5.5bn (£4.73bn, $6.1bn), an increase of €600m on last year and €50m more than expected.

Air France’s passenger traffic and load factor increased but its unit revenue underwent a 0.6 per cent drop in takings in relation to flight capacity in the three months up to September. The company’s operating profit dropped 16 per cent to €900 million (£777m, $1bn) with net income down 53 per cent at €366 million.

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CEO Ben Smith is expected to outline a new strategy next week. One objective is to narrow Air France’s profitability gap with Dutch partner KLM. Its 2.1 per cent profit margin from January-September was less than a quarter of KLM’s 8.5 per cent.

The company will welcome the turmoil engulfing competitors this month. Thomas Cook collapsed, Norweigian Air announced a reduction in its long-haul budget and hundreds of Boeing 737 MAX jets remain grounded.

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