Kevin O'Toole/LONDON

THE EFFECTS OF THE initial installments of state aid have begun to appear in the Air France results, with the carrier posting a modest pre-tax profit for the first half of it financial year. It warns that there will be redundancies to come, however.

Air France, which is now reporting on a 1995/6 financial year, revealed a pre-tax profit of Fr176 million ($36 million) to the end of September. It marks a major improvement on a loss of more than Fr1 billion a year ago.

The carrier warns that it may still struggle to achieve its goal of limiting full-year losses to Fr1.2 billion, as it enters a weak second half, but says that this "...nonetheless remains the target".

On top of these losses, Air France will also have to set aside "several hundred million francs" to cover the likely cost of its cabin-crew redundancy scheme.

The half-year improvement was helped by a 39% fall in financing charges, thanks largely to the first installment of state aid, which has helped the group to reduce its debts.

The debt fell by another Fr6 billion, to just over Fr20 billion, as the second tranche of cash arrived in mid-September. The final installment of the Fr20 billion aid is due in 1996.

Underlying the improvement in the first half was an encouraging fall in expenses, helped by the strength of the franc against the US dollar. Labour costs were down by 4.6%, says the carrier.

The currency strength also contributed to a 4% drop in sales, however. Passenger yields were down by 4.7%, but would have risen by 1.5% at constant exchange rates. Traffic slipped by 1.4% against a similar rise in capacity, although the load factor achieved was a respectable 72.8%.

Source: Flight International