Air France KLM joins European peers to warn of lower earnings

Air France KLM follows Lufthansa with a gloomy profit prediction

Air France KLM rocked aviation stocks yesterday by warning that a glut of spare seats on its routes would dent its profits this year, just weeks after German rival Lufthansa made a similarly gloomy prediction.

The Franco-Dutch airline said that over-capacity on some long-haul routes this summer was dampening ticket and cargo prices, prompting the firm to revise down its 2014 earnings forecast from €2.5bn (£2bn) to between €2.3bn and €2.2bn.

Shares in Air France fell 8.7 per cent to €8.58 yesterday, dragging down London-listed peer IAG, which declined seven per cent to 335.9p, as well as US rival Delta, whose stock opened almost six per cent lower.

Air France joins a growing list of airlines to blame over-capacity for disappointing performances, following several years of growing traffic and favourable fuel prices. Lufthansa has cut its 2014 and 2015 outlook, while low-cost carrier Ryanair has slashed prices on some routes to compete, putting pressure on its yields.

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