Air France-KLM post record profits, revenue despite tough end to 2023

PARIS: Air France-KLM announced Thursday a record net profit of 934 million euros ($1.01 billion) for 2023, despite a tough end to the year marked by operational difficulties and the war in the Middle East.

The Franco-Dutch airline group also reported record revenue of 30 billion euros, while adding that it had returned to positive equity for the first time since 2019.

Its profit result was a little below analysts’ expectations of more than a billion euros, according to forecasts compiled by Factset and Bloomberg.

The results, however, contrast with the nightmare of the pandemic years, which saw the group lose a cumulative 10.4 billion euros in 2020 and 2021, forcing it to carry out two recapitalisations and request help from the French and Dutch governments.

In a statement, the group also announced a solid operating margin of 5.7 percent for 2023, up 1.2 points on the previous year, which had seen it return to profit.

“In 2023, we delivered on our commitment to strong operational and financial performance,” group CEO Benjamin Smith said in the results statement.

The record results were achieved despite passenger numbers not yet returning to pre-Covid levels.

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Air France, KLM and subsidiary Transavia transported a total of 93.6 million passengers last year, up 10.3 million on 2022 but still 10.4 million fewer than in 2019.

At the same time, Air France-KLM continued to deleverage, with its net debt falling from 6.33 billion euros at the end of 2022 to 5.04 billion at the end of 2023.

The group also saw its net debt-to-gross operating margin (EBITDA) ratio improve to 1.2 times, down from 1.8 times the previous year, which should make refinancing easier.

In the fourth quarter, however, the group suffered a net loss of 256 million euros, a fall of 752 million compared with the equivalent period in 2022.

‘Geopolitical situation’

Air France, and especially KLM, suffered from a shortage of spare parts – a recurring problem for the aviation sector since the pandemic – and also of qualified labour, which disrupted the availability of certain aircraft on the ground.

In addition, the “geopolitical situation”, mainly the war between Israel and the Palestinian militant group Hamas, led Air France-KLM to suspend certain routes, including to Tel Aviv, from the start of October, and cooled demand for neighbouring countries.

Transavia, the group’s “low-cost” carrier, suffered from this and failed to be profitable last year despite continuing its expansion.

Finally, freight rates fell sharply after surging in the wake of the pandemic.

Despite its record profit, Air France-KLM did not mention a return to issuing dividends for its shareholders.

Looking ahead, for 2024, its 20th anniversary, the group said it wants to increase passenger capacity by 5.0 percent compared to last year and limit the increase in its unit costs to between 1.0 and 2.0 percent, compared to 3.5 percent in 2023.

It expects net capital expenditure of between 3.0 and 3.2 billion euros, in particular to invest in new-generation aircraft to cut its CO2 emissions.

Despite air tickets still being expensive compared to pre-pandemic prices, Air France-KLM said it does not see a weakening in the sustained demand for travel that fuelled its 2023 results.

It said the booking rates for the first half of 2024 are similar to those at the same time last year, despite an increase in capacity.