Air France-KLM warns of higher annual costs after Q3 profit miss By Reuters

By Elviira Luoma

(Reuters) -Air France-KLM on Thursday reported a bigger-than-expected drop in its quarterly operating result and warned that this year’s costs would be higher than previously projected.

The French-Dutch airline group’s shares slumped 11% and will see their biggest daily drop in over two years if the losses persist.

It expects its unit cost – the average cost of flying an aircraft seat one mile – to grow by around 3% in 2024, instead of the previously forecast 2%, after it rose 3.4% in the third quarter and with worsened expectations for the fourth.

“This is mainly related to higher staff and maintenance cost at KLM and lower capacity planned,” Bernstein analysts said in a note.

The group’s Dutch arm in October said it would cut costs and postpone investments to lift profits, as the industry faces rising equipment costs, staff shortages and higher airport fees.

“At KLM, persistent cost challenges spiked higher than anticipated, putting pressure on parts of its business model and reinforcing the need for more concrete structural improvements,” CEO Benjamin Smith said in a statement.

Amsterdam’s Schiphol airport will increase its fees for airlines by 41% from April 2025, which KLM said would lead to an operating profit impact of 65-110 million euros next year.

Air France-KLM also said that France’s proposed hike of the solidarity tax on flight tickets would hit its operating result by 90-170 million euros and affect its competitiveness in 2025.

Its operating profit fell by 162 million euros to 1.18 billion euros ($1.27 billion) in the third quarter, below a consensus of 1.24 billion, hit by higher costs and the Paris Olympics which caused international tourists to avoid the city and residents in France to postpone their holidays.

Quarterly revenue still rose by 3.7% to 8.98 billion euros, driven by increased capacity and strong underlying demand.

While demand has remained stable, maintenance costs, adverse weather, air traffic control issues and disruption in the Middle East have continued to weigh on airlines.

($1 = 0.9315 euros)