Air France-KLM Doubles Profits Despite Inflation

Air France-KLM announced Friday it doubled its net profit in the second quarter, benefiting from high demand in air travel despite rising inflation which has increased costs.

The Franco-Dutch group posted a net profit to 604 million euros ($662 million) between January and June.

Its sales rose by 13.7 percent compared with the same period in 2022 to 7.6 billion euros, boosted by an increase in passengers and higher ticket prices, achieving a "record" operational margin of 9.6 percent, it said in a statement.

The results were reached despite seat capacity being down eight percent compared with 2019, before the pandemic.

Air France, KLM and Transavia transported a total of 24.7 million passengers between April and June, down 11 percent compared to the same period four years ago.

Ticket prices have soared since the pandemic, driven by rising fuel costs, increased demand and capacity constraints.

Despite high inflation putting a strain on consumers' pockets, Air France-KLM said it expects bookings to be at the same or higher level compared with 2022 for the rest of the year. That includes the crucial summer vacation season underway.

The increased number of passengers is not causing problems like last year when airports had trouble rehiring enough staff and there were huge lines for security checks and mountains of lost and late luggage.

Amsterdam's Schiphol airport, where KLM is based, was particularly hard hit, with the CEO resigning last year after it was forced to limit the number of flights.

But Air France-KLM chief executive Ben Smith said "we're pleased that the operational situation at Schiphol is stabilising" this year.

Smith said that at Paris' main Charles De Gaulle airport, the situation "so far, it's sensitive, fragile but moving, no major issues" as authorities strive to ensure that infrastructure in the region is ready to handle the surge in traffic for the Olympic Games next year.

Meanwhile, inflation is affecting the group's costs, which have risen 5.6 percent in the second quarter of the year, compared to just 0.7 percent in the first quarter.

These costs reduced operational profits by some 337 million euros, offsetting gains from lower fuel prices. Still, operational profits nearly doubled compared to the second quarter last year by 733 million euros.

Air France-KLM turned a profit last year after having lost 11 billion euros during the pandemic, requiring the governments of France and the Netherlands to intervene.

The company's debt has fallen by 1.4 billion euros since the end of December to 4.9 billion.

With consolidation in the European airline industry continuing -- Lufthansa took a major stake in Italy's ITA in May -- Smith indicated Air France-KLM was interested in the privatisation of Portugal's TAP, which was nationalised during the pandemic.

"There will be a formal process put in place, we'll see whether we qualify and are in the position and have the desire to enter into that formal process," said Smith.

"From a strategic perspective, we do like TAP," he added.