Air France-KLM Q1 Loss Widens On Rising Fuel Costs

Air France-KLM Q1 Loss Widens On Rising Fuel Costs
May 6, 2019


Air France-KLM SA (OTC: AFLYY) reported on Friday that the fiscal 2019 first-quarter net loss had widened from the same period last year, mirroring pressure on unit revenue and rise in fuel costs that more than offset a fall in unit costs. Notably, the first-quarter loss widened despite an increase in passengers. The stock closed Friday’s trading session at $10.81, down $0.56 or -4.90% from the earlier close.

The Paris, France-based airline company, reported fiscal 2019 first quarter revenues of €5.99 billion, up 3.1% from €5.81 billion in the same period last year. For the quarter ended March 31st, 2019, a net loss of the Franco-Dutch group widened to €320 million from €269 million in the prior year period.

Loss from current operations was €303 million in the recent quarter, compared with €118 million in the year-ago period. The losses widened mainly due to the Air France strike. EBITDA for the first-quarter plunged 31.7% to €424 million.

Commenting on the results, Benjamin Smith, CEO of Air France-KLM Group CEO said, “As anticipated, the first quarter has been challenging for the European airline industry including the Air France-KLM Group, as substantial industry capacity growth in the off-peak business period led to unit revenue pressure.”

In a note to clients, Liberum analysts said: “Offsetting higher fuel costs were always going to be a challenge. Even without the additional pressure on unit revenues from excessive industry capacity growth.”

The number of passengers who flew with the airline rose 3% to 22.67 million.  Network revenue increased by 1.7% to €5.18 billion. Total passenger network revenues increased by 1.8% y-o-y to €4.63 billion. The airline reported a load factor of 86.3%, down 0.4% on a y-o-y basis.

Total cargo revenues rose 0.7% to €547 million, while cargo load factor dropped 0.5% to 59.1%.

Available seat kilometers (ASK) revenue increased 3% to $75.59 billion, led by North Atlantic, South American, and Asian networks. However, passenger unit revenue per ASK fell 1.2% to €0.0617, primarily driven by the Easter shift and significant industry capacity growth in the winter. During the quarter, unit costs declined 0.4% on fuel price and constant currency basis, led by a decline in consumer compensations compared to prior-year period that was characterized by Air France strikes.

Moving forward, the company said that it would implement strategies to minimize unit costs in fiscal 2019. The airlines aim for unit cost reduction of between -1% to 0% at constant currency and fuel price basis. Furthermore, the company anticipates its fuel bill for fiscal 2019 to increase in the range of €650 million to €5.6 billion.

The weak results are expected to keep the stock bearish in the short-term.

Technically, the stock has broken below its 50-day moving average. The RSI indicator has crossed below the reading of 50. As a result, we can expect the stock to remain bearish in the short-term.

airfrance-klm - technical analysis - 6th May 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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