Air France-KLM is largely blaming fuel pricing and its hedging policy, as well as the economic downturn, for a fourth-quarter operating loss of €574 million ($781 million).
Fuel hedging generated a negative impact amounting to €234 million, while revenues for the three-month period were down by 12% to €5 billion.
For the full year Air France-KLM posted a full-year loss from operating activities of €193 million, and a net loss of €814 million against the previous year's €756 million profit.
Revenues stayed flat at just under €24 billion for the year.
Chief executive Pierre-Henri Gourgeon says the year comprised "contrasting halves" with a "resilient" performance in the first six months being "wiped out" by the economic climate in the second.
"The sharp decline in oil prices had a negative impact on the fuel bill in the second half, whereas our hedging policy had been efficient in the first half," he adds.
Gourgeon says the current fiscal year is "likely to be equally challenging", and while there are "signs of stabilisation" there remains uncertainty over the outlook.
Operating costs reflected last year's high oil prices, and rose 6.1% to €24.1 billion as the fuel bill soared by €1.1 billion to €5.7 billion.
Air France says it suffered from a heavy negative financial impact as a result of its practice of settling its fuel bill on the basis of the previous month's price.
This impact "would not have existed" if invoiced prices had been "in synch with consumption", it states.
Air France-KLM has reduced passenger capacity by 4.5%, and freight capacity by 11%, for summer 2009. The company has also halved its investment plans to €1.4 billion and increased cost-savings targets to €600 million.
These measures, it says, combined with a $1.9 billion reduction in its fuel bill should offset a "significant proportion" of the fall in the airline's revenues.