Air France-KLM surprise profit beat lifts shares to 5-year high

Air France-KLM reported better than expected annual results that sent its shares to a five-year high on Thursday after the airline benefitted from tight cost management and stronger pricing in the fourth quarter.

Chief Executive Ben Smith said the airline enjoyed a particularly strong finish after a year shaped by both operational and external challenges.

Airlines saw strong demand in 2024 but were hit with strikes, high inflation and maintenance costs.

In the fourth quarter, Air France-KLM reported an operating profit of 396 million euros ($427 million), nearly double the 205 million euros expected by analysts polled by LSEG, driven by increased passenger numbers and cost containment efforts.

The shares were up 20.5% at 0950 GMT, with JP Morgan analysts saying in a note that the group posted an "impressive fourth quarter beat on stronger pricing with a very positive outlook for 2025".

Further cost control, pricing increases and reduced profit headwinds could lead to a shift in earnings momentum into 2025, the analysts said.

Air France-KLM expects operating profit to improve by at least 300 million euros in 2025, with costs (excluding fuel) up by a low single digit percentage and positive unit revenue development in the first quarter of the year.

Full-year operating profit fell 6.4% to 1.6 billion euros ($1.73 billion) in 2024, but was above the 1.35 billion euros expected by analysts polled by LSEG.

In contrast, Lufthansa posted operating profit which fell by more than a third in 2024, also hit by strikes and mounting costs along with aircraft delivery delays, but it is also enjoying a much stronger end to the year and final quarter, which lifted its shares.

DUTCH UNIT KLM GRAPPLES WITH SOARING COSTS AND LOWER MARGINS

Dutch unit KLM on Thursday deemed its annual performance "disappointing" and warned cost pressures continued.

KLM's operating results decreased by 234 million euros to 416 million euros in 2024, with an operating margin of 3.3%.

"We are still not operating at 100% of our flight capacity and costs continue to rise sharply. As a result, we run the risk of not earning enough to keep investing in our future," KLM CEO Marjan Rintel said.

Rintel said that the current margin levels would not allow it to finance new aircraft.

The group confirmed it would proceed with 250 job cuts in non-operational roles, in line with its "Back on Track" program announced in October.

($1 = 0.9268 euros)