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Air France-KLM profit beats expectations

Air France-KLM reported better than expected operating profit for 2016 and said it had made a “resilient” start to 2017 as it promised further cost-cutting efforts this year.

The Franco-Dutch carrier reported a 2016 operating result of 1.049 billion euros, better than analyst expectations for 969 million euros, and helped by low fuel prices and efforts to restrict the number of extra seats it put on the market.

The group wants to do more flying more this year though, with plans to increase capacity by between 3 and 3.5 percent, against an increase of 0.7 last year. Rival Lufthansa plans to increase capacity by 4 percent this year.

It said that while there was a high level of uncertainty around revenues from tickets, unit revenue had fallen by just 0.7 percent in January, compared with a decline of 5 percent for 2016 as a whole.

“Unit revenues are more reasonable at the start of 2017 than for 2016,” Chief Financial Officer Frederic Gagey told journalists, saying it was too early to extrapolate it to the rest of the year.

He said Air France-KLM was aiming to reduce costs by at least 1.5 percent this year, after a fall of 1 percent last year.

Similar to rival Lufthansa, Air France-KLM is trying to cut costs and is planning a new Air France unit, dubbed Boost, that will operate at lower costs out of its hub at Charles de Gaulle. Under the proposals, pilots’ costs would be reduced by 15 percent while those of cabin crew by 40 percent.

Pilots’ unions have so far expressed scepticism about the plans, which Air France presented last week and which would cover a maximum of 18 short-haul and 10 long-haul planes.

In 2016, the Air France unit made an operating margin of 2.4 percent, against 6.9 percent for the KLM division.

Gagey said the difference was because the Air France unit was hit by strikes by pilots and cabin crew, and also by the impact of a series of deadly Islamist militant attacks in France that have weighed on the country’s tourism industry. (Reuters)

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