Air France profits fall

18th May 2004, Comments 0 comments

PARIS, May 18 (AFP) - Air France reported a sharp drop in annual profits on Tuesday but investors welcomed the underlying performance and announcement of a commerical alliance with Russian airline Aeroflot which strengthens it against Lufthansa in eastern Europe.

PARIS, May 18 (AFP) - Air France reported a sharp drop in annual profits on Tuesday but investors welcomed the underlying performance and announcement of a commerical alliance with Russian airline Aeroflot which strengthens it against Lufthansa in eastern Europe.

The profits fall of 22.5 percent was at the most optimistic end of the range forecast by analysts and the price of shares in the company rose by 1.44 percent to EUR 2.69 in early trading.

Net profits in the 2003-2004 financial year fell by 22.5 percent from the figure for the previous year to EUR 93 million (USD 111.60 million).

Analysts had expected profits of between EUR 20 million and EUR 97 million.

Air France, which is the process of absorbing the Dutch airline KLM, said that group sales fell 2.8 percent to EUR 12.337 billion.

The company, which is a founder of the Skyteam alliance, also signalled on Tuesday, 18 days after eight former Communist countries in eastern Europe joined the European Union, that the Russian airline Aeroflot is to join the alliance.

Air France chairman Jean-Cyril Spinetta said that he expected Aeroflot to announce next Monday that it intended to join the Skyteam alliance.

"I think that, effectively... Aeroflot will signal the choice it has made in terms of its alliance in favour of Skyteam."

He told a press conference on the results that he expected the announcement to be made next Monday, when he and KLM chairman Leo van Wijk visited Moscow for a ceremony at the Kremlin.

"It is important because the group (Air France) was enormously weak in eastern Europe, particularly compared with the Star Alliance. It would have been a blow if Lufthansa (of Germany) had tied up with Aeroflot."

Air France and the US airline Delta Airlines are founders of the Skyteam alliance, a so-called code-sharing arrangement which was born in June 2000.

Other members are AeroMexico, Alitalia, CSA Czech Airlines and Korean Air.Alitalia, which hopes to link up with the Air France-KLM group, is trying to restructure out of a financial crisis which threatened its survival.

Skyteam is one of several alliances between airline companies around the world. Such arrangements typically allow the companies to share their ticket-issuing, routing and booking facilities.

At brokers Aurel Leven, analyst Tristan d'Aboville, commenting on the Air France figures, said: "The quality of these results reflects a very good performance by the group in the fourth quarter."

Results 12 months earlier had been undermined by the effects of the SARS virus in Asia and political tension in the Middle East, he recalled.

"The outlook given by the group confirms that traffic is recovering and also the gains to be expected from the two companies which should ensure that the results improve," he said.

The Air France-KLM group said that in the current financial year it aimed to increase operating results strongly, on the basis of a price of oil of USD 33 per barrel.

The airline had said on Monday that it was increasing its fares by EUR 3 per flight from Wednesday because of a rise of oil prices.

An analysts who declined to be named at one European bank said that Air France was the second-best-covered airline in the world regarding the risk of a rise of the price of aviation fuel.

The group said that a three-year cost-cutting plan should save EUR 200 million this year, twice the forecast figure and would result in economies of EUR 400 million in 2005-2006 and EUR 600 million in 2006-2007.


© AFP

Subject: French news

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