Air France-KLM's operating profit rose 34.5% to €1.05 billion ($1.11 billion) in 2016, a result the group attributes to lower fuel expenses and "good cost performance".
Passenger numbers grew 4% to 93.4 million. But revenue declined 3.3% to €24.8 billion.
The fuel bill shrank more than a quarter to nearly €4.6 billion, as lower prices brought a €927 million saving and hedging losses declined €605 million.
Capacity was increased 1%, and the group says unit cost declined "in line with the target of 1%" on a constant currency, fuel-price and pension-expense basis.
Separate industrial action by Air France pilots and flight attendants during the summer reduced the operating result by €130 million.
Currency effects – notably an appreciation of the dollar and weakening of currencies including the British pound, Brazilian real and Chinese yuan – had a €289 million negative impact.
Air France's operating profit declined 12.7% to €372 million; KLM's, meanwhile, rose more than three-quarters to €681 million.
The two network carriers' combined capacity was increased 0.7%, while traffic grew 1%. "Strict capacity discipline and active yield management limited the downward pressure on unit revenue, [in] particular on premium traffic," the group says.
Low-cost subsidiary Transavia achieved a break-even operating result, after generating a loss of €35 million in 2015. Transavia France's capacity was increased 23%, and that of its Dutch sister operation 11%.
Air France-KLM's cargo business marginally reduced its operating loss, to €244 million, while revenue declined 14.7% to €2.07 billion. Full-freighter capacity was slashed a quarter, amid a total capacity reduction of 4.6%. Meanwhile, traffic and freight tonnage declined 6.3% and 6.2%, respectively.
For the group's MRO division, operating profit grew 11% to €238 million. Revenue increased 4.9% to €4.18 billion, led by a 16.3% rise in third-party turnover.
Air France-KLM reduced its net debt 15% to €3.66 billion. Last year, the group sold year just under half of its shareholding in catering arm Servair as well as a 1.13% stake in global distribution company Amadeus.
Operating free cash flow declined 41% to €347 million.
The group says it will in 2017 be "pursuing and amplifying the initiatives already under way in terms of unit-cost reduction", with a target "in excess of 1.5%". But chief executive Jean-Marc Janaillac also states that "we are resolutely committed to regaining the offensive". He adds: "In an economic and geopolitical context that remains very uncertain, and faced with aggressive competition, the status quo is not an option."
Air France-KLM intends to increase total passenger capacity 3-3.5% this year "in order to regain the offensive in long-haul and to improve the performance in medium-haul".