Air France-KLM beats profit forecasts as KLM flags further cost cuts

By Joanna Plucinska and Gianluca Lo Nostro

LONDON, Nov 5 (Reuters) - Air France-KLM beat third-quarter earnings expectations on Thursday, as its Dutch business unveiled a sweeping restructuring plan aimed at improving annual earnings by €1 billion ($1.1 billion), sending the group's shares up 13%.

KLM said its workforce would shrink further by nearly 15% over the coming years as it seeks to improve profitability and fund investment in new aircraft. It has made a series of job cuts in previous years, including slashing 250 office jobs in 2025.

Unlike Air France, KLM has struggled for years with operations at its Amsterdam base, hurt by difficulties around traffic limits and challenges around its post-pandemic recovery.

KLM said it would outsource about 4,000 jobs to partners, including catering companies and the Air France-KLM holding company, while eliminating about 1,000 positions in a push to improve productivity.

"Improving our annual earnings by €1 billion is essential to delivering our strategy," said KLM Chief Financial Officer Bas Brouns, describing the measures as far-reaching and "sometimes painful".

Shares in the Franco-German airline group jumped around 13% in early Paris trading, their biggest one-day rise in more than a year.

KLM, which merged with Air France in 2004, accounts for around 40-45% of group revenue and headcount.

Dutch labour union CNV said in a statement that the plans would hit workers hard and called on management to clarify how it would ensure sufficient staffing during the overhaul.

PROFIT ABOVE EXPECTATIONS BUT FUEL BILL SWELLS

Air France-KLM posted third-quarter operating profit of €1.34 billion, above the €1.1 billion forecast in a company-compiled analyst consensus.

Results were largely driven by strong demand for non-stop flights to Asia and the success of its growing premium travel offering.

The group, however, revised its 2026 capacity growth forecast to 2% from a previous range of 2% to 3%, while raising its expected 2026 fuel costs to $9.2 billion from $8.9 billion.

Bernstein analysts said in a note to investors that the results were underpinned by strong pricing and cost control, highlighting robust demand for premium cabin services.

European airlines continue to face rising fuel costs, although network carriers such as Air France-KLM and Lufthansa have been cushioned in part by fuel hedging and resilient demand for higher-margin premium cabins.

Spot Northwest European jet fuel prices have nonetheless fallen about 12% this week to their lowest level since August, tracking a broader decline in oil prices.

($1 = 0.8880 euros)

(Reporting by Joanna Plucinska in London and Gianluca Lo Nostro in Gdansk; Editing by Alexander Smith, Emelia Sithole-Matarise and Louise Heavens)