Air France KLM shares slide as profits hit by pilots' strike and cost-cutting continues

 
Lynsey Barber
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The airline was hit by a two-week pilots' strike (Source: Getty)

The figures

Air France KLM shares have fallen as much as six per cent in early trading to 713 cents per share on the .

The owner of Air France and KLM airlines said group revenue fell 2.4 per cent to €24.91bn (£18.4bn) during 2014, despite a 1.3 per cent rise in passenger numbers for the full year.

Earnings before interest, tax, depreciation and amortisation fell to €1.59bn with the effects of a 14-day pilots' strike.

The Franco-Dutch group will cut investments by €600m over the next two years - including cutting the equivalent of another 800 jobs through voluntary measures.

It also plans to reduce debt, which increased by €51m to €5.4bn in 2014, to €5bn by the end of 2015, more than the €4.5bn previously planned.

Why it's interesting

2014 was a tough year for the European carrier, after it slashed profit forecasts three times. It also took a hit from a 14-day pilots' strike, which cost the airline €425m.

In the ever-turbulent airline industry, which has previously blamed over-capacity for denting profits, the outlook is still challenging in Europe which isn't much helped by worries over the Eurozone economy.

There's pressure from increasing competition from low-cost carriers and Asian and Middle Eastern airlines expanding into the region.

It is also in the midst of a five-year plan to reduce costs in its French business and expand its low-cost carrier Transavia.

What Air France KLM said

Chief Executive Alexandre de Juniac said: “The environment is challenging and mixed. We've reasons to be cautious."

While low oil prices will reduce the group's fuel bills, that will be felt less by the rising US dollar, de Juniac said.

In short

Further belt-tightening is required - and planned - at Air France KLM, but the challenges are likely to continue with economic worries and oil price volatility.

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