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LONDON (MarketWatch) — Air France-KLM, Europe‘s largest airline, on Friday warned that it would find it "very difficult" to meet its operating-profit targets for the year and said it would limit capacity increases throughout next summer.
The airline said it has decided to increase capacity by 1% to 2% for the next year in order to protect profitability as demand for air travel slumps amid the economic downturn. The carrier had previously expected to boost the number of seats on its flights by 5% this year.
Because of the prevailing difficult economic conditions, Air France-KLM (FR:003112: news, chart, profile) said it would struggle to meet its target for operating income of 1 billion euros ($1.28 billion) this year. It reassured investors, however, that its operating result would remain "comfortably" in the green as long as market conditions do not deteriorate further.
Air France shares fell 6.8% in Paris morning trading. Airlines, which suffered from record-
high fuel prices for the better part of the year, are now getting hit by the global economic downturn caused by the financial crisis. Although oil prices have come down significantly from their high of around $140 this summer, the decline is not enough to offset the drop in demand.
The International Air Transport Association on Friday said international passenger air traffic fell 2.9% in September compared to the same month a year earlier.
"The deterioration in traffic is alarmingly fast-paced and widespread. We have not seen such a decline in passenger traffic since SARS [severe acute respiratory syndrome] in 2003," said chief executive Giovanni Bisignani.
"Even the good news that the oil price has fallen to half its July peak levels is not enough to offset the impact of the drop in demand. At this rate, losses may be even deeper than our forecast $5.2 billion for this year," he added.
source: www.marketwatch.com
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