Paris (France) (AFP) – Air France-KLM cut its 2026 outlook, saying higher fuel prices caused by the Middle East war would expand its fuel bill by more than a third. The airline group, which also includes budget airline Transavia, said it now expects to expand capacity by two to four percent this year, down from its earlier forecast of three to five percent.
Air France-KLM announced a net loss of 252 million euros ($294 million) in the first quarter, an increase of one percent from the same period last year. “While fuel price increases are not yet reflected in the results we present today, they are expected to weigh on the coming quarters,” said chief executive Benjamin Smith. The war, triggered by US and Israeli attacks on Iran at the end of February, has nearly halted shipping traffic via the Strait of Hormuz, through which around a fifth of the world’s oil normally passes. Jet fuel prices more than doubled in the first few weeks of the war.
Air France-KLM, like many other European airlines, tries to cushion the impact of price swings by locking in supplies in advance. It said it had not felt the impact in March. Despite this, the airline group said it expected to add 2.4 billion euros to its annual fuel costs, with 1.1 billion in this quarter. Like other airline groups, Air France-KLM said it had increased fares to compensate.
Concerns about shortages of jet fuel have also emerged, but the airline’s chief financial officer Steven Zaat said it did not have any concerns until June. He said Dutch officials had reassured them about the availability of jet fuel for six months and noted that Paris Charles de Gaulle airport received supplies via pipeline to France’s largest refinery that sources oil from Norway, the United States, and Africa. However, the airline noted that two Asian airports — in Singapore and Tokyo — had indicated that they did not want any additional flights as long as the war continues.
Air France, KLM, and Transavia have relatively little exposure to the Middle East, where disruptions due to air travel were the most severe. The group said other markets had held up well. Revenues rose by 4.4 percent to nearly 7.5 billion euros during the quarter, just beating analyst expectations compiled by financial data provider Factset. It carried 22.3 million passengers, an increase of 2.3 percent, and increased seat occupancy by 0.3 percentage points to 86.3 percent.
Shares in Air France-KLM rose 3.7 percent in afternoon trading in Paris while the blue-chip CAC 40 index was down 0.1 percent overall.
© 2024 AFP
