KLM warns on full year
KLM Royal Dutch Airlines said Wednesday it was likely to start reducing flight frequencies in order to cut costs as management said that full-year operating profit would come in “well below” last year.
The warning came as KLM said first-quarter income dropped by half amid the deteriorating global economy.
Net income fell to E19 million (US$16.7 million), or 39 cents per share, in the three months ending June 30, from E43 million, or 90 cents per share, in the same period in 2000.
KLM would have reported a loss but for one-time gains from of E30 million from the disposals of aircraft and shares in Equant, the data network operator.
The results were slightly ahead of analysts expectations following a warning earlier this month from the airline.
Rob Ruijter, KLM’s new chief financial officer, said the network review was “an ongoing process while the downturn is deepening, “and did not rule out grounding aircraft “if the situation warranted that”.
Overall, the carrier expects capacity to grow by 2% this year, as it replaces older aircraft with newer, larger ones.
Operating profits in the quarter shrank to E23 million from E100 million in 2000, last year, hit by lower average passenger fares and higher costs, as revenues narrowly shrank to E1.71 billion from E1.75 billion.
A slight 1% gain in passenger and cargo traffic was offset by a similar decline in yield, or average fare, which fell for the first time in seven quarters.
Despite cutting fares, KLM failed to fill most of its extra seats in the period as traffic growth lagged the 3% rise in capacity. Unit costs rose by 4%.
The airline cited strong growth on routes to Latin and South America, where traffic rose 20%, slightly outpacing a sharp gain in capacity. Traffic fell 4% and 5% on North Atlantic and Asia-Pacific routes, respectively
Journal of Commerce JOC
