Air France-KLM unveiled a narrower-then-expected loss in its first quarter as the fallout from April’s ash crisis dropped into second place behind renewed evidence of an upswing in the economy.

Europe’s largest airline said it had lost 132 million euros ($170.4 million) in the three months to end-June, less than half the average loss forecast by markets, as premium seats and cargo space filled up.

Without the forced shutdown of European airspace due to concerns over volcanic ash, the airline group said it would have made a marginal profit. It highlighted a faster-than-expected recovery in cargo which is seen as a barometer for global trade.

“Activity in the first quarter saw a strong recovery in both passenger and cargo, in spite of the five-day closure of European air space following the Icelandic volcano eruption,” the Franco-Dutch airline group said.

“The first quarter saw an acceleration in the recovery in activity levels, particularly in business travel and cargo. Forward bookings for the second quarter are solid, but uncertainty surrounding the economic environment and the fuel price leads us to remain prudent for the second half of the year.”

Passenger unit revenues rose 14.8 percent to levels close to those of 2007-08 and this area would have broken even without the ash crisis, while cargo would have made 11 million euros.
Breakeven Targeted
The European airline’s figures came after Singapore Airlines posted a stronger-than-expected first quarter and forecast a sustained recovery in its business.

Leasing firms placed a wave of new plane orders at the Farnborough Airshow last week in anticipation of recovery from the airline industry’s worst recession.

According to a Thomson Reuters I/B/E/S consensus survey, analysts were on average expecting a first-quarter operating loss of 277 million euros at Air France-KLM, revenue of 5.43 billion euros and a net profit of 233 million euros.

The actual operating loss marked a sharp improvement from a 496 million euro deficit in the same period a year earlier.

Revenue rose 10.7 percent to 5.72 billion euros and net income, which most analysts following the company consider a less important benchmark than its operating earnings, swung to a profit of 736 million euros from a loss of 426 million euros. For 2010/11 as a whole, Air France-KLM reiterated a target of breaking even at the core operating level but did not mention whether this excluded the impact of pre-2009 fuel hedges—a proviso included in its last earnings report in May.

However it said the forecast did exclude the impact of April’s volcano crisis which it pegged at 158 million euros, broadly the same figure as an earlier provisional estimate. (Reuters)