Air France-KLM looks to cut costs as first quarter loss widens

Air France-KLM will freeze the hiring for support staff as part of a cost-cutting drive after reporting a wider first-quarter operating loss amid higher expenses, the conflict in the Middle East and lower cargo unit revenue.

The carrier’s operating loss widened to €489 million ($523 million) compared with €306 million in the year-earlier period, the Franco-Dutch group said Tuesday. Cash at hand decreased by €600 million from the end of 2023 to €9.9 billion, following the repayment of a convertible bond in March, the company said. 

“Our operating income was impacted by disruption costs and a slower cargo business,” Chief Executive Officer Ben Smith said in the statement. Still, demand for air travel remains “structurally robust.”

While the return of travel has held up since the end of the Covid-19 pandemic, European airlines have had to contend with other challenges, from rising costs to supply chain disruption, strikes and conflicts complicating flight paths. Rival Deutsche Lufthansa AG on Tuesday also said it would initiate a cost-cutting drive that includes freezing projects and reviewing hiring in some areas.

Free cash flow was impacted by a €610 million January deferred payment to an Air France pilot pension fund — payments that had been halted during the Covid-19 health crisis — as well as €120 million in deferred social charges and wage taxes, also inherited from the pandemic.

Air France-KLM reaffirmed full-year capacity guidance but trimmed its 2024 capital expenditure target to €3 billion, the low end of a previously given range.

Still, the company remains bullish on summer bookings and is not expecting further air traffic controller strikes in France ahead of the summer Olympic Games kicking off in Paris in July.