Air France-KLM reported a swing back to profit that was sharper than expected for last year and said it was on course to meet its main debt reduction goal in 2015 after a prolonged crisis.

Posting its first underlying profit in three years, Europe’s second-largest network carrier by revenues said it made an operating profit of 130 million euros in 2013, compared with a 336 million euro operating loss the year before.

Analysts were on average expecting 2013 operating profit of 88 million euros, according to Thomson Reuters I/B/E/S data.

Air France-KLM confirmed a forecast of 2.5 billion euros in earnings before interest, tax, depreciation and amortisation (EBITDA) or gross earnings for 2014 and said it aimed to reduce net debt to 4.5 billion euros in 2015, as previously pledged.

“We are reasonably confident that the economic situation has stopped weakening,” Chief Executive Alexandre de Juniac told reporters.

Revenues grew 0.4 percent to 25.52 billion euros, below consensus forecasts, while EBITDA grew by a third to 1.855 billion euros, beating average forecasts of 1.797 billion.

Net attributable losses widened to 1.827 billion euros after an impairment charge surounding deferred tax assets. The Franco-Dutch airline group said it would not pay a dividend.

The rebound in widely watched operating profit came as Air France-KLM reduced staff costs - its number one expense - by 2.3 percent as a result of its “Transform 2015” restructuring plan that includes 7,900 job cuts in two phases.

The group also lopped 5.2 percent off its fuel bill, its second largest item of costs which fell to 6.9 billion euros.

“We are coming out of the red. Transform 2015 is going exactly as expected,” de Juniac told reporters, adding that unit costs fell 3.8 percent in 2013.

No Capital Increase

Pierre-François Riolacci, the new finance director of Air France-KLM who joined from Veolia Environnement, denied recent speculation of a capital increase. Such a move made no sense given net cash of 4.23 billion euros, he said.

“A capital increase that merely reduced debt would be of no use. Our cash position in no way justifies a capital increase,” he said, adding such a move would “destroy shareholder value.”

The group ended the year with net debts of 5.348 billion euros, down from 5.966 billion 12 months earlier.

Air France-KLM gave no sign of rapprochement with Alitalia after breaking off talks over a possible investment in the Italian carrier last year.

It also kept its distance from new talks between Alitalia and Abu Dhabi’s Etihad Airways. Talks began last week between Etihad and the Italian airline’s creditors with a view to taking a stake as it broadens an alliance of equity partnerships.

“Nothing has changed. We are not talking to Etihad,” de Juniac said, whether on the future of Alitalia or on Etihad taking a stake in Air France-KLM itself.

Air France-KLM has said it is only willing to invest in Skyteam partner Alitalia under certain conditions, which it says have not been met.

In November, it refused to take part in a 300 million euro rights issue for Alitalia, allowing its stake to fall automatically to 7 percent from 25 percent.

Air France-KLM’s passenger business climbed out of the red with an operating profit of 174 million euros in 2013, but cargo only managed to shave its losses to 202 million euros, hit by weak global trade and freight industry overcapacity.

However Air France officials said there had been less evidence of industry-wide capacity discipline on key North Atlantic passenger markets in the past year. (Reuters)