Air France-KLM beats quarterly profit expectations but trims capacity forecasts
Air France-KLM Q2 Results and Strategic Adjustments
By Alessandro Parodi and Joanna Plucinska
July 30 (Reuters) - Air France-KLM cut full-year capacity guidance on Thursday despite a lower than expected drop in second-quarter profit after revenue gains from premium and long-haul travel.
The airline group is leveraging its premium offering and ticket price increases to sustain profits through an industry downturn, though Dutch arm KLM said improvements were not good enough to strengthen its financial foundations.
Global carriers, squeezed by months of elevated jet fuel costs and reduced capacity because of the Iran war, are racing to capitalise on the more lucrative summer season to avoid financial trouble later in the year.
Financial Performance Overview
The Franco-Dutch group posted second-quarter adjusted operating profit of €484 million ($552.5 million), down from €736 million in the same period last year but higher than the €327 million consensus from analysts polled by the company.
Premium Travel Demand
"We delivered strong commercial performance on the back of steady demand for premium travel, notably on the Asian and North American markets," the group's CEO, Benjamin Smith, said in a statement.
Impact of Global Events on Forecasts
Iran War Weighs on Forecasts
KLM Chief Executive Marjan Rintel said in a separate statement that global uncertainties, rising costs and intense competition would continue to pose structural challenges. The Iran war is the latest threat to company finances already facing operational challenges at its Amsterdam Schiphol base.
KLM's Financial Position
"We must remain realistic: one good half-year does not make KLM structurally strong and robust," Rintel said.
Air France-KLM said it had lowered full-year capacity expectations, now guiding for a 1% drop in short and medium-haul flights and a group increase of between 2% and 3%. That is a second cut from the 3% to 5% forecast made before conflict erupted in the Middle East in February.
Finance chief Steven Zaat told reporters the cuts will mainly materialise in the fourth quarter and will include fewer daily flights through European cities such as Dusseldorf and London.
Strategic Moves and Future Outlook
Air France-KLM Bids for TAP Stake
The company trimmed its April fuel bill projection for 2026 by 4% to $8.9 billion, citing newer and more efficient aircraft as well as jet fuel hedging.
Consolidation Opportunities
With €6.8 billion in net cash and €3.5 billion in undrawn credit lines at the end of June, the airline group could reap cheap consolidation opportunities after the Middle East conflict nearly halved the sector's 2026 profit forecast and pushed weaker carriers toward restructuring or buyouts.
The group submitted a binding offer on Wednesday for a stake of at least 44.9% in Portugal's TAP for an undisclosed price, competing with Lufthansa for a strategic partnership and access to TAP's lucrative slots linking its Lisbon hub with Brazil, Portuguese-speaking African countries and the United States.
($1 = 0.8760 euros)
(Reporting by Alessandro Parodi in Gdansk and Joanna Plucinska in LondonEditing by Rosalba O'Brien, Matt Scuffham and David Goodman)
