Air France-KLM Group has announced its first annual operating profit since 2010, beating analysts' estimates as fuel costs fell and the terrorist attacks in Paris could not hold fourth-quarter earnings. It said a payment agreement with the pilots remains crucial to remain competitive when the price of oil rises again.
Shares of the largest airline in Europe rose the most in five months after it has made a profit before interest and taxes of 816 million euros (US $ 908mil) for 2015, compared with a year-earlier loss of 129 million euros. Analysts had expected a figure of 706 million euros, the average of 10 estimates. Main arm of the company Air France is struggling to get a permanent reduction in staff costs after efforts to push through a deal last year led to violent protests.
CEO Alexandre de Juniac said that no agreement will be impossible to compete with discount airlines like EasyJet Plc in Europe and the rival Gulf of rapid growth in long-haul routes. "Despite a favorable environment created by lower fuel prices, we will not reduce our ambition to improve our competitive position, while economic and geopolitical uncertainties remain high," said CEO in a conference call.
Air France shares rose as much as 7.3% to 7.99 euros, the most since Sept. 3, before trading 6.3% higher at 7.92 euros as of 8:12 a.m. in Paris. The stock has added 12% this year. The fuel bill declined by 22% on a basis of equal footing compared to 2014, when earnings were also held back by strikes by cabin crew which cost 330 million euros.
The company reported an operating profit of 150 million euros in the last quarter, beating estimates, despite losing about 120 million euros in revenue after the terrorist attacks. Unit costs fell by 0.6% in 2015, in line with expectations in November, while below the initial target of 1% to 1.3% still indicates progress, said Yan Derocles, analyst at Oddo Securities in Paris.
"The results show that in a transition year managed to reduce unit costs and were able to exercise financial discipline and the ability to control," he said. Air France-KLM said it expects another operating profit in 2016, without providing a specific goal, guidance Derocles said was "vague".
The impact of fuel economy will be "significantly offset" by the negative impact of currency and downward pressure on unit revenues, a measure of the charges, as other airlines add seats she said. The Director General said it would continue to seek a reduction of between 0.8% and 1.2% in unit costs in 2016, with an average reduction of 1.5% in the period from 2016 to 2018, he departed from 2015 to 2017.
Management aims to revive talks employees in the coming months, with drivers yet to sign on final terms for savings agreed under the old Transform plan which expired last year, let alone the 2,020 Make Juniac says strategy is key to the future of the company. The CEO has promised that, in the absence of a breakthrough that will stop jobs, aircraft and weaker routes to reduce the plane to a size where it can be sustainable and profitable. He has already announced a reduction of 1,000 jobs after the failure of previous talks.
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