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BIZ: Air France Posts Higher Q1 Profits Q-on-Q

Wed Sep 05, 2001 6:38 am

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Air France bucks earnings trend of European rivals
By Kevin Done, Aerospace Correspondent
Published: September 4 2001 18:26GMT | Last Updated: September 4 2001 19:48GMT

Air France on Tuesday announced a modest increase in operating profits in contrast to the sharp decline in first-quarter earnings at its European competitors and deep losses at most US airlines.

Operating profits excluding proceeds from aircraft disposals rose by 5.4 per cent to E195m ($172.9m). Net profits excluding exceptional gains from the sale of financial assets rose 9.5 per cent to E195m.

Air France is less exposed than some of its rivals such as British Airways to the North Atlantic, where traffic volumes have been hit by the slowdown in the US economy.

The group said it was maintaining its forecast for achieving an unchanged operating profit for the full year "on the basis of current levels of operations, performance and market conditions."

Pierre-Henri Gourgeon, Air France chief operating officer, said that the group did not "see any negative tendencies in future bookings for the three months September to November."

In sharp contrast to Air France's performance, BA recently reported a halving in operating profits during its first quarter from April to June and warned of "a more difficult" winter ahead. Lufthansa suffered a fall in operating profits in the first six months from January to June from E349m to E105m.

The French flag-carrier has benefited from the growing dominance of its main base at Paris Charles de Gaulle airport, recognised as the most efficient aviation hub in Europe.

As other European airlines have reduced networks, eliminating some direct routes and reducing capacity and frequencies, Air France has attracted growing volumes of transfer traffic to Charles de Gaulle.

Mr Gourgeon said that the move by Alitalia, Austrian Airlines and Sabena to stop flying to Johannesburg had allowed the French airline to draw more transfer passengers on to its own flights from Paris increasing unit revenues by 20 per cent and transforming a marginal service into a highly profitable route.

He forecast similar gains on the Paris/Los Angeles route, where American Airlines and United Airlines are withdrawing their services, and on some routes to South America where other European airlines were abandoning direct flights.

The airline is reacting to the downturn on the North Atlantic, however. It said it would leave capacity on North American routes unchanged at last year's level in the coming winter schedule but would continue to expand on other routes.

Air France is still expanding its operations, in spite of reducing its increase in overall capacity from the initially planned 7.5 per cent to 5 per cent.

Mr Gourgeon said Air France expected to restart its Concorde supersonic service from Paris to New York around the beginning of November.

The group was hopeful that it would win antitrust immunity from the US authorities for its planned four-way transatlantic joint venture with Alitalia, CSA Czech Airlines and the European carriers' US partner Dalta Air Lines, during the autumn to allow operations to begin in January next year.

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