by Joanna Plucinska
LONDON (Reuters) – Air France-KLM shares hit a historic low on Friday on the Paris Stock Exchange before reducing their losses after the announcement of a record profit in the third quarter which, however, narrowly missed market expectations. analysts, who are concerned about rising fuel costs and the lack of profit forecasts for the fourth quarter.
Air France KLM shares fell 1.65% to 10.82 at 09:35 GMT, after falling as much as 7.63% to 10.16 euros, a low never reached so far.
The airline reported an operating profit of 1.34 billion euros for the July-September period, up 31% from a year earlier, but 2% below the forecast. analysts.
In contrast, British Airways owner IAG beat expectations on Friday with a record third-quarter profit, as airlines benefit from increased travel this summer.
Air France-KLM’s turnover stood at 8.6 billion euros in the third quarter, up 8.9%, in line with consensus. The group’s operating margin increased by 2.9 points year-on-year, reaching 15.5%.
Air France-KLM has left its forecasts for capacity in seat kilometers, capital expenditure and unit costs unchanged for the entire financial year.
“Overall, we think the results are mixed, they did not beat expectations this time around and there is a lack of commentary on fourth-quarter profitability,” Stifel analysts said in a note.
They also point to an increase in fuel spending forecasts for the full year to $7.8 billion, up from $7.5 billion previously.
Neil Glynn, analyst at Aircontrol, notes that unit revenue per ASK (available seat kilometers) increased 5.7% year-on-year at constant currency during the quarter, representing a slowdown from the increase by 13.1% during the previous quarter.
The load factor for the fourth quarter of 2023 is 72% on long-haul (compared to 75% in 2022) and 59% on short-medium-haul (compared to 61% in 2022), adds Sathish B. Sivakumar, analyst at Citi.
DECLINE IN DOMESTIC DEMAND
The airline does not expect to return to pre-pandemic capacity levels in the French market. It thus announced in mid-October a project to consolidate all its domestic and international flights departing from Paris-Charles de Gaulle by the summer of 2026, thus leaving the Paris-Orly hub with the exception of connections to Corsica.
“In the domestic market (…) we do not expect to return to pre-crisis levels (…) due to the TGV rail links in France,” said managing director Ben Smith during a conference call with analysts.
“For connections like Paris-Marseille, where the train takes around three hours, we have seen demand drop by 50%.”
Geopolitical instability following the Hamas attacks in Israel on October 7, which led to flight cancellations, is not expected to have a significant impact on the group.
The main route affected by Air-France-KLM is that to Tel Aviv where outward and return flights are suspended until October 31, the group said on Thursday.
“In terms of impact on the overall results, it is insignificant,” commented Ben Smith.
The group is, however, seeing a slight reduction in demand to some of the other destinations it serves in Israel.
Air France has not suspended its services to other destinations in the Middle East, the chief executive said.
(Report by Joanna Plucinska, with Diana Mandiá and Federica Mileo; French version by Camille Raynaud and Kate Entringer, edited by Blandine Hénault)
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