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Air France-KLM warns of greater yearly expenses after Q3 revenue miss

Air FranceKLM on Thursday reported a biggerthanexpected drop in its quarterly operating result and warned that this year's expenses would be greater than formerly projected.

The French-Dutch airline company group's shares fell 11% and could see their biggest daily drop in over 2 years if the losses continue.

It anticipates its system cost - the average expense of flying an airplane seat one mile - to grow by around 3% in 2024, rather of the previously anticipated 2%, after it rose 3.4% in the third quarter and with worsened expectations for the fourth.

This is generally related to higher staff and upkeep expense at KLM and lower capability prepared, Bernstein experts stated in a. note.

The group's Dutch arm in October stated it would cut expenses and. hold off financial investments to raise profits, as the market faces. increasing devices expenses, personnel shortages and higher airport fees.

At KLM, persistent expense difficulties spiked higher than. prepared for, putting pressure on parts of its organization model and. enhancing the requirement for more concrete structural improvements,. group CEO Benjamin Smith stated in a declaration.

Amsterdam's Schiphol airport will increase its costs for. airline companies by 41% from April 2025, which KLM approximated would lead. to an operating earnings impact of 65-110 million euros next year.

Air France-KLM also said that France's proposed hike of the. uniformity tax on flight tickets could hit its operating result. by 90-170 million euros in 2025.

Direct repercussion might be higher fares which could make. air travel less available to clients in our own market,. Smith said at a press conference.

He added that it might be challenging to pass on these expenses to. customers, and the airline might therefore need to soak up a. portion of them, even more impacting its competitiveness and. success.

The group's operating earnings fell by 162 million euros to. 1.18 billion euros ($ 1.27 billion) in the 3rd quarter, missing. a consensus of 1.24 billion euros.

The result was struck by higher system expenses and the Paris. Olympics which caused global travelers to avoid the city. and homeowners in France to delay their holidays.

Quarterly earnings still increased by 3.7% to 8.98 billion euros,. driven by increased capability and strong hidden demand.

(source: Reuters)