Air France-KLM's third quarter profit fell €122 million to €824 million, citing higher cost challenges as well as the Paris Olympic Games impacting Air France.
“Persistent cost challenges spiked higher than anticipated, putting pressure on parts of its business model and reinforcing the need for more concrete structural improvements,” said group CEO Benjamin Smith.
The Games impacted the company by around €160 million and unit costs were up 3.4% in the quarter due to higher costs for staff, operation, and maintenance.
The company's ‘back on track’ targets a €450 million short-term EBIT improvement and EBIT margin above 8% by 2026-2028. Measures include increased labour productivity, simplifying organisation, cutting costs, as well deferring or postponing investments. It will continue its fleet renewal investment programme.
Revenues were up 3.7% to around €9bn and EBITDA fell €97 million to €1.9bn. Operating margin was down 2.4 percentage points to 13.1%.
The company's total passengers were up 3.5% to 27.9 million in the quarter with capacity up 3.6%. Load factor was down 40 basis points to 89.3%.
During the period, the company generated a free cash flow of €28 million. As of the quarter's end, it had a net debt of €6.7bn and a net debt to EBITDA ratio of 1.7x.
Full year capacity is expected to be up 4% compared to 2023. Unit costs are to increase approximately 3% over 2023, having previously estimated around 2% increase. This was on the back of the third quarter increase and “higher than expected” fourth quarter unit costs. Full year CAPEX is expected to be at €3bn. It had previously guided below €3bn. This was due to timing effects related to sale of assets which are expected to be executed in 2025.