OAG Travel News

Decline in business travel hits airline.

Air France KLM adjusted its financial forecast yesterday (March 26), abandoning its hopes of an operating profit for 2008/09.

Europe's largest airline predicted an operating loss of around €200m ($272.1m) for the year ending March 31, hit by a decline in business travel and international trade.

It said poor fuel hedging had cancelled out the benefits of falling oil prices, estimating the "negative impact" at €200m.

AF KLM said its traffic had followed "similar trends" to that of the industry. Figures for March, one of the carrier's busiest months, showed further decline.

Pierre-Henri Gourgeon, AF KLM's ceo, said the next financial year would "begin in a context of unprecedented difficulty."

Mr Gourgeon said there would be "little visibility on how the economy will evolve and on the volatility of factors such as currencies and the oil price."

But hubs at Paris Charles de Gaulle and Amsterdam Schiphol are expected to continue gaining market share, said Mr Gourgeon.

He said AF KLM's cash position remained "comfortable" at €3.5-4.0bn, while next year's fuel bill was expected to fall by 20%.

Fuel hedging would also be reduced from 90% this year to 43%.

"This drop, combined with our other cost-saving measures should allow us to offset a significant part of the decline in revenues and to limit our operating loss," the airline said.

AF KLM has predicted a 6% fall in revenue this year, the result of passenger and cargo capacity reductions of 3.4% and 13% respectively.

Source: www.abtn.co.uk