Air France-KLM’s Q1 Results Fall Short of Expectations Due to Rising Costs

Air France-KLM Reports Higher Than Expected First Quarter Operating Loss

In a surprising turn of events, Air France-KLM announced a first-quarter operating loss of 489 million euros ($524.31 million), exceeding expectations. The airline group attributed this loss to high customer compensation at Dutch carrier KLM and one-off payments to staff.

This news comes amidst a challenging time for European airlines, with rising costs due to labor disruptions and geopolitical turbulence. Just last month, German group Lufthansa issued a profit warning linked to strikes.

Despite the setback, Air France-KLM remains optimistic about its future outlook. The company has pledged to limit the rise in unit costs to 1-2% for the 2024 financial year, even though they surged to 4% in the first quarter.

Chief Executive Ben Smith expressed confidence in the company’s ability to achieve its 2024 unit cost outlook, despite the challenges faced in the first quarter.

Analysts had predicted a lower loss for the group in Q1, with forecasts at 424 million euros. Last year’s Q1 loss was 306 million euros, making this year’s loss even more significant.

The operational performance at KLM between December 2023 and early March played a significant role in the increased compensation payouts to customers. Costs also rose at suppliers and air traffic control services during this period.

As Air France-KLM navigates through these challenges, the company remains focused on its long-term goals and strategies to overcome the current obstacles in the aviation industry.