Carrier flying high despite cost of oil

Published on Thursday 25 November 2004 12:34

AIRLINE giant Air France KLM has enjoyed better-than-expected business in the past three months.

And the recently-merged French/Dutch carrier, which operates flights to Paris and Amsterdam from Edinburgh, said it was sticking largely with forecasts for the full-year despite the effect of escalating fuel bills.

However the company, the biggest airline in the world by market value after the May tie-up, said soaring oil prices had forced it to drop a commitment to "substantial" operating growth, even though it said the merger was paying off.

Air France KLM said core operating profit before aircraft disposals rose to 206.5 million in the three months to September 30, from a proforma level of 153.3m at the same point last year.

That easily beat the 178m-192m range that analysts had been forecasting.

Group chairman Jean-Cyril Spinetta said net income would be higher for the year as a whole but said it was hard to be more precise at this stage because of the complex accounting impact of the 560m merger between the two carriers.

Helped by a tentative recovery in global aviation from its worst-ever recession, Air France KLM has been bouncing back from year-ago levels damaged by strikes, the Sars virus and war in Iraq - while also struggling to absorb much higher fuel bills.

But it said the merger - which actually leaves the two brands flying separately under common management - had boosted revenues earlier than expected as KLM uses Air France’s network power to get more passengers on to its own unique destinations.

Over the second quarter, revenues rose to 3.6 billion from a proforma year-ago level of 3.4bn.

Air France KLM said the upward pressure on its fuel bill in the second half of the year would slow down the improvement of the group’s financial performance, but

thanks to cost saving and synergies, it would continue to target higher operating income than last year.