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Air France to lose EU200 Million after travel slump

Written by editor

Air France-KLM Group, Europe’s biggest airline, said it will report a loss for the year ending March 31 and is unlikely to post a profit in the following 12 months as the recession crimps demand for

Air France-KLM Group, Europe’s biggest airline, said it will report a loss for the year ending March 31 and is unlikely to post a profit in the following 12 months as the recession crimps demand for travel.

Air France will probably suffer an operating loss of 200 million euros ($271 million) this fiscal year, it said in a statement today. The Paris-based company had predicted a positive operating profit as recently as Feb. 13.

Revenue will fall about 6 percent next fiscal year, when a loss is likely as job cuts and a lower fuel bill fail to compensate for the drop in demand, the carrier said today. Airlines will lose a collective $4.7 billion this year, the International Air Transport Association said yesterday, lifting a previous forecast by almost 90 percent.

“The deepening financial crisis has led to a sustained decline in activity,” Air France said in the statement. “The initial weeks of March, traditionally one of the busier months, show a further decline. These lower activity levels have been accompanied by a significant deterioration in unit revenues both in passenger and cargo, notably as a result of the decline in business travel and international trade.”

Air France closed down 1 percent at 7.14 euros before today’s announcement. The stock has lost 22 percent this year, valuing the company at 2.14 billion euros.

Job Cuts

The carrier said in February it would eliminate as many as 2,000 jobs after lower ticket revenue and dwindling cargo volumes pushed to a 505 million-euro net loss in the three months ended Dec. 31.

Air France has also been hurt by fuel-hedging contracts which locked in prices that turned out to be higher than those on the spot market. Revenue was also diminished as the falling oil price compelled the company to reduce ticket surcharges.

British Airways Plc, Europe’s third-largest carrier, said March 5 it will have an operating loss of about 150 million pounds ($218 million) for the year ending this month and a similar result in fiscal 2010. Deutsche Lufthansa AG, the European No. 2, said March 11 that operating profit this calendar year will be well below 2008’s 1.35 billion euros.

SAS Group, owner of Scandinavian Airlines, is making the deepest cuts among European airlines, eliminating 3,000 jobs and divesting units after logging the biggest loss in 16 years.