Air France-KLM quarterly earnings drop 59 percent

Tue Aug 5, 2008 6:57 AM EDT

Air France-KLM said Tuesday it would deepen cost-cutting plans this year after rising oil prices led to a higher fuel bill and a steep drop in first quarter earnings.

Europe's largest airline said it would seek to save an additional euro190 million (US$296 million) on top of the euro430 million (US$669 million) already budgeted, taking the total planned savings for the year to euro620 million (US$965 million).

The deeper cost cuts are a response to "the new economic environment," Air France-KLM said in a statement, but it did not say where the savings would come from.

During the first quarter, Air France-KLM made savings of euro114 million (US$177 million), the company said.

Air-France-KLM said net profit in the April to June period was euro168 million (US$262 million), down 59 percent from a year earlier as rising oil prices caused the airline's fuel bill to jump 24 percent.

The drop in earnings was comparable to the falls recorded by Europe's two other largest airlines. Last week British Airways said net profit fell 90 percent in the April to June period, while Germany's Lufthansa reported a 60 percent drop over the first six months of the year.

Air France-KLM said its business passenger traffic growth remained "dynamic" and that the profitability of its cargo operations continues to improve.

The airline confirmed its May forecast for a decline in operating profit in the current fiscal year of around 30 percent to euro1 billion (US$1.56 billion).

The company also forecast its fuel bill would rise to euro5.86 billion (US$9.12 billion) this year, up 28 percent from last year.

Air France-KLM carried 19.7 million passengers in the first quarter, up 2.2 percent from a year earlier. Sales rose 5.8 percent to euro6.29 billion (US$9.79 billion). The airline confirmed its forecast for a 2 percent increase in capacity for the winter 2008 and summer 2009 seasons.