Air France-KLM Group reports 5.7% increase in full year profit, fourth quarter swings to loss

Air France-KLM Group has reported a 5.7% increase in its operating result for the full year 2023, totalling €1.7bn ($1.86bn). Its revenues were up 14% year-on-year to €30bn ($32.5bn). The Group’s 2023 full capacity was up 9%. Its cargo division Martinair reported a 6.2% capacity increase for the year though its revenues were down 29% to €2.49bn ($2.13bn). Its MRO division, Air France Industries-KLM Engineering & Maintenance, reported a 23.2% increase in revenues at €1.71bn ($1.85bn). However, its operating result was down €13 million ($14.1 million) to €150 million ($162.6 million) in 2023. The company reported that it ended the year with €10.5bn ($11.38bn) in liquidity with a net debt-EBITDA at 1.2x. The airline group's 2023 premium cabin load factor was two percentage points above 2019 levels. Though its fourth quarter premium cabin load factor was down 1.4 percentage points in comparison to 2019. Its fourth quarter results swung to a loss with the company citing geopolitical tensions. The group reported an operating result loss of €56 million ($60.71 million), a €190 million ($205.98 million) decline from 2022’s fourth quarter. In particular, Air France-KLM's cargo revenue was down 22.9% YoY in the fourth quarter of 2023 to €651 million ($705.86 million), with the geopolitical context and operational disruptions. The group also noted that the fourth quarter performance from Air France and Transavia were impacted by the geopolitical situations in Africa and the Middle East. KLM’s performance was mostly impacted by operational disruptions as a result of supply chain issues as well as the geopolitical tensions and bad weather conditions. In an earnings call, the company's CFO Steven Zaat said the impact totalled around €65 million ($70.2 million). Zaat added: ""On top [of that], we see that especially the indirect impact from the Middle East situation on our North Atlantic market and also on our South American market has impacted our fourth quarter."" Following the fourth quarter results, the group’s shares saw a significant decline on February 29, 2024, falling as much as 9% on its Paris listing. “Looking ahead to 2024, a key priority will be to continue reinforcing our performance, via the continued execution of our strategy,” said Air France-KLM CEO Benjamin Smith. The company is aiming to increase capacity by 5% in 2024. It also expects unit costs in the first quarter of the year to rise 4% in comparison to 2023 due to continued high disruption costs in the first two months. ""We are quite comfortable because we are trying to stabilise now our production and that will reduce for sure,"" said Zaat. He added: ""We expect when we stabilise our production to have lower customer compensation and we expect also from labour productivity and fuel efficiency to support this unit cost guidance."" Costs will also be impacted by a one-time payment of 2% of the year salary to KLM staff as agreed in its collective labour agreement. Full year unit costs for 2024 is expected to be 1-2% above 2023. Net capital expenditure for 2024 is expected to be between €3bn and €3.2bn ($3.25bn and $4.67bn). 2024 marks the group’s 20^th anniversary and also the Paris 2024 Summer Olympics of which the group is an official sponsor. Smith said that capacity will not be increased for the Paris Olympics with the company ""not in a position to do that"" and so will be ""operating the fleet as normal this summer."" Though, he does expect ""a slight increase in performance"" for Air France during the Olympics.