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  • Rising unit revenue powers Air France-KLM profit up 42% in 2017

Rising unit revenue powers Air France-KLM profit up 42% in 2017

Air France-KLM has credited a rise in unit revenue with driving a 42% increase in operating profit to €1.49 billion ($1.86 billion) last year.

Total revenue rose 3.8% to €25.8 billion, says the airline group.

It notes that the 2% increase in unit revenue contributed €447 million to the operating result, while capacity growth added a further €28 million. An increase in unit cost was a €20 million drag on the operating result, while currency effects subtracted €119 million. However, the fuel-price effect was positive to the tune of €101 million.

Air France-KLM's total fuel bill was €4.51 billion, a €90 million decline from 2016.

The positive operating result in 2017 was transformed into a €274 million net loss by a "non-current expense" of €1.43 billion arising from de-recognition of KLM crew pension assets on the balance sheet.

Passenger numbers at group level grew 5.6% to reach 98.7 million.

Transavia transformed its 2016 breakeven into a €81 million operating profit. Air France-KLM's cargo business, meanwhile, "confirmed its turnaround in the second half of 2017", with traffic growing 1.8% and unit revenue 1.6% as a result of an uptick in business in Asia.

For the maintenance business, operating profit declined €23 million to €215 million. The group notes margin pressure in components MRO as a result of "a tougher competitive landscape, including competition from OEMs", as well as "manufacturer supply-chain pressure and procurement-price escalation" in engine maintenance.

Still, Air France-KLM "closed 2017 with strong results boosted by a positive business environment", states group chief executive Jean-Marc Janaillac. "Thanks to the commitment of employees and the continuing focus on the quality of customer service, the group confirmed its leadership position in Europe, in traffic terms, while reporting an operating income increase of 42% and significantly improving its financial profile."

He adds that the group will seek to "pursue the offensive" and "work on competitiveness and unit-cost reduction" in order to maintain "profitable growth momentum" in 2018.

For this year as a whole, Air France-KLM is targeting a "positive free cash flow", before acquisitions and disposals, of €2-2.5 billion.

The group aims to reduce unit cost by 1-1.5% at constant currency, fuel, and pension charges. However, it expects its fuel bill to rise by €150 million, to €4.7 billion, based on current forward prices and hedge positions.

Long-haul forward bookings for the coming three months are ahead of last year's levels, notes the group, which expects to increase capacity 3-4% across its "passenger network" and 6-7% at Transavia this year.

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