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Air France-KLM Group will drop routes, curb winter-season seating capacity and deepen other cost-cutting measures after second-quarter profit fell 22 percent.
Operating profit tumbled to 185 million euros ($203 million), hurt by a continuing slide in fares and a stronger dollar that raised fuel prices, Air France-KLM said in a statement Friday. Margins on that basis also shrank, sliding 0.9 percentage point to 2.8 percent.
Europe’s biggest airline group posted net losses in the last four years under pressure from Persian Gulf carriers on international flights and discounters such as EasyJet Plc on shorter routes. Management also has struggled to win over Air France pilot unions on its savings plans.
“The rapid conclusion of the negotiations with the Air France unions is key to re-launching the results turnaround,” Chief Executive Officer Alexandre de Juniac said in the statement.
Air France-KLM will trim available seating in the second half to meet lower demand, with capacity cuts of 14 percent to Japan, 5 percent to Brazil and 6 percent to East Africa. It also plans to reduce spending by another 300 million euros by 2017.
The Paris-based company didn’t specify which routes will be affected, or elaborate on where other cuts might come beyond saying it plans “an acceleration and an increase in the magnitude of our cost-saving initiatives.”
Revenue for each seat flown a kilometer, an airline- industry benchmark, fell 4.8 percent on a like-for-like basis, Air France-KLM said. Fares on long-haul routes were hurt by travel-budget reductions at oil- and gas-related customers, especially in Africa.
The airline maintained its 2015 targets for unit cost improvement in a range of 1 percent to 1.3 percent and for net debt of about 4.4 billion euros by year-end.
This article was written by Andrea Rothman from Bloomberg and was legally licensed through the NewsCred publisher network.